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Tyco (TYC) Remains Well Poised for Solid Inorganic Growth

On Apr 5, Zacks Investment Research updated the research report on security services provider Tyco International plc TYC.

Tyco has also been actively making efforts to reposition its portfolio to build a right mix of businesses and to maximize long-term value for its shareholders. The company has a pipeline of attractive acquisitions that complement its existing businesses. These potential acquisitions are in line with the its strategy and provide solid long-term returns to its shareholders.

During second-quarter fiscal 2016, Tyco signed a merger deal with the global diversified technology company, Johnson Controls Inc. JCI. Per the deal, Tyco will own 44% equity in the joint company. Post merger, the companies plan to strengthen their building products and technology, integrated solutions and energy storage portfolios. Tyco believes that this acquisition will help it to expand its global footprint in the building-technology market, enhance shareholder value and launch innovative solutions.

The combined entity is slated to be renamed "Johnson Controls plc" and is likely to be listed on the New York Stock Exchange under the "JCI" ticker.  The new company is expected to maintain Tyco's Irish legal domicile and global headquarters in Cork, Ireland, while the operational headquarters in North America will be in Milwaukee.

With an improved and enriched product portfolio, the transaction creates immediate opportunities for near-term growth through cross-selling, complementary channel networks, and expanded global reach for established businesses. The new company will also enjoy synergistic benefits through mutual sharing of resources worth $500 million over the first three years after closing of the transaction. These annual cost synergies are expected to be achieved by increasing efficiencies, eliminating redundancies, integrating the global branch networks, and leveraging the combined scale of over $20 billion buildings business platform. In addition, the transaction is expected to create at least $150 million in annual tax synergies.

We are bullish on the company’s fortunes based on the relative stability of the global security and fire markets, as well as high and predictable cash generation and limited balance sheet risks.

Tyco currently has a Zacks Rank #2 (Buy). A couple of equally ranked stocks in the industry include Alarm.Com Holdings, Inc. ALRM and SuperCom Ltd. SPCB.

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JOHNSON CONTROL (JCI): Free Stock Analysis Report
TYCO INTL PLC (TYC): Free Stock Analysis Report
SUPERCOM LTD (SPCB): Free Stock Analysis Report
ALARM.COM HLDGS (ALRM): Free Stock Analysis Report
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