As part of its divestiture program, Tyco International intends to sell the Tyco Global Network (TGN) – its undersea fibre optic telecommunications network – as well as to divest itself of more than fifty other businesses.
The businesses it will divest, the largest of which had annual sales of less than $400 million, had combined annual revenues of $2.1 billion in fiscal year 2003, or about 6%of the Company’s total revenue base. The TGN had a pre-tax operating loss of $117 million, while the remaining businesses had a combined operating profit of approximately $55 million in 2003.
The businesses to be divested are in every Tyco business segment except ‘Plastics and Adhesives’. Measured on the basis of revenue, more than half are in its Fire and Security segment.
Tyco’s restructuring program includes the consolidation of 219 manufacturing, sales, distribution, and other facilities. The actions are expected to reduce employment at the company by about 7,200 personnel. Of the facilities to be consolidated, 184 are in Fire and Security, 30 are in Plastics and Adhesives, and the remainder are in Engineered Products and Services.
Total annual savings from the restructuring program are estimated at $230 million by 2005.
‘Although the TGN is the world’s largest undersea fibre optic network, we are not prepared to invest further in this industry and intend to exit the business. The other planned divestitures are small, non-strategic businesses that require a disproportionate amount of resources and management attention,’ said Tyco Chairman and Chief Executive Officer Ed Breen.