Jones Lang LaSalle

An analysis: Tyco restructures
By: Mike Mathis , Special Writer

What does it mean? Will there be layoffs? How much will it hurt?

WEST WINDSOR — Don't expect much to change at Tyco International Inc.'s headquarters here — at least not right away. Although the manufacturing conglomerate recently announced its intention to split into three separate, publicly traded firms last month, company officials maintain the move will have no short-term impact on the roughly 400 people employed in Mercer County, where the executive offices have been located since moving from New York in 2003. However, no one knows for sure what to expect beyond next year.

A Tyco spokeswoman said the mood at the Roszel Road headquarters remains upbeat as employees continued to stay focused on their work. "We don't expect any significant change for our employees," Tyco spokeswoman Sheri Woodruff said. "We're certainly committed to the West Windsor and Princeton area, and our employees are very much focused on the business at hand. But "people are looking forward to more information" about the move, Ms. Woodruff added. Announcement of the restructuring came as Tyco continues to recover from accounting scandals that resulted in the imprisonment of two former company executives who authorities allege defrauded the company of millions of dollars to fund lavish lifestyles. "In the past several years, Tyco has come a long way," Chairman and CEO Ed Breen said. "Our balance sheet and cash flows are strong, and many legacy financial and legal issues have been resolved. We are fortunate to have a great mix of businesses with market-leading positions."

The individual companies "will be able to move faster and more aggressively — and ultimately create more value for our shareholders — by pursuing their own growth strategies as independent companies," he added. Under the restructuring plan announced Jan. 13, Tyco will separate into three individual companies: Tyco Healthcare, Tyco Electronics and Tyco Fire & Security/Engineered Products & Services. The latter division, which includes ADT security systems and is engaged in the manufacture of industrial valves and sprinkler systems, will be based in West Windsor. Tyco expects to complete the transactions during the first quarter of next year, the company said. After the divestiture, each segment will have its own independent board of directors and strong corporate governance standards, according to a Jan. 13 statement in which the split was announced.

Tyco employs 250,000 people worldwide and generated revenues of $40 billion last year, according to Tyco's Web site. In revealing the reorganization plan, company officials said they believed that separating into three independent companies was the best approach to enable each business to achieve its full potential and maximize profits. Officials said they looked at a variety of options — including continuing to operate Tyco in its current form, selling off portions of the company and spinning off only one of the firm's divisions — before agreeing on the plan. Tyco Fire & Security/Engineered Products & Services currently operates as two separate entities that, combined, employ more than 118,000 people and generate annual revenues of $18 billion, the company said. "We believe this separation is a logical next step in Tyco's evolution, and we are absolutely convinced that this is the right decision for the long-term success of our businesses, employees and shareholders," said Mr. Breen, who will lead Tyco Fire & Security/Engineered Products & Services with Chris Coughlin, Tyco International's chief financial officer. But what does that mean for the community?

Large companies including Tyco typically have an important presence in their communities beyond the workplace. Many Tyco employees have become major contributors to their communities though volunteering and other philanthropic endeavors, Ms. Woodruff said. "We will continue to have a presence in the area and a commitment to the area," she said. Kristin S. Appelget, president and CEO of the Princeton Regional Chamber of Commerce and a member of the West Windsor Township Council, said such companies as Tyco are economically vital to a region, because they employ people in high-paying, skilled jobs who also contribute time and money to local nonprofit organizations. Tyco has played an integral role in the Mercer Alliance to End Homelessness, a collaborative effort involving corporations, government, religious and nonprofit entities aimed at preventing and ending homelessness.

Tyco has partnered with Habitat for Humanity, YWCA, Junior Achievement, Boys and Girls Club and Mercer Street Friends Food Bank to address the problem, according to its Web site, and the company is an active participant in the United Way of Greater Mercer County. "They've done a nice job integrating into the community," Ms. Appelget said of Tyco. If Tyco were to relocate all its operations from Mercer County, the area would not likely sustain the devastating economic blow other communities have suffered when a large employer, such as a factory, closed its doors, because the region has many diverse businesses and numerous educational institutions, Ms. Appelget said.

West Windsor had a labor force of 15,640 employees in 2000, according to the Mercer County Planning Department. In addition to Tyco International, the township's large employers include Sarnoff Corp. and Mercer County Community College, according to the department. "Companies don't pick up and leave overnight," Ms Appelget said. "We're still an attractive place to locate and maintain a business. "We have a wide diversity of business," Ms Appelget said. "If you look at it in terms of total impact, Tyco is a large employer, but not the largest. They've become a very valuable contributor to the business community, and I hope they continue to do so."

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