CHICAGO – Shares in industrial conglomerate Tyco International Ltd. (TYC) rose more than 3 percent in early trading Monday following a Wall Street Journal report the group may be broken up, a prospect welcomed by analysts.
"There is little in terms of synergistic effects between many of Tyco's businesses and the question is whether the whole is worth more than the sum of its parts," said Morningstar analyst Eric Landry, referring to Tyco's diverse portfolio that includes companies producing electrical tubing and surgical gauze.
"Breaking it up would allow investors to better evaluate the individual parts so I think it's a good idea," he added.
Tyco spokeswoman Sheri Woodruff said the company had no comment to make on the report that it may be broken up into three parts.
This is not the first time that the idea of breaking up the $60 billion conglomerate has been bandied about.
Former Chief Executive Officer Dennis Kozlowski touted the prospect of splitting up Tyco shortly before resigning in 2002, the day before being indicted on New York state tax evasion charges.
Kozlowski was sentenced in September to 8-1/3 to 25 years in prison along with former chief financial officer Mark Swartz for stealing $150 million from the company.
Tim Ghriskey, chief investment officer of Solaris Asset Management, said that if accompanied by a name change the news of a potential break-up was welcome.
"There is a lot of negative sentiment surrounding the Tyco name which was created by the demise of Kozlowski," he said. "Drawing a line under that era and moving on will be a positive sign for investors."
Tyco is a "core holding" for Solaris, Ghriskey said, and he said that there has been little visible "added value from creating a conglomerate with little in terms of synergy" between many of its core businesses.
"It will be good news if it happens, but while we've heard rumors off and on that it's coming so far nothing's happened," he added.
Tyco's stock slid some 16 percent over the past year, a trend analysts said could be reversed if the company were split into coherent parts where real synergies exist.