Mar 14, 2001 Tyco International Ltd. (NYSE: TYC; LSE: TYI; BSX: TYC), a diversified manufacturing and service company, and The CIT Group, Inc. (NYSE: CIT, TSE: CIT.U, and Exchangeable Shares - TSE: CGX.U), the largest independent commercial finance company, today announced that they have entered into a definitive agreement pursuant to which Tyco will acquire CIT in a tax-free stock-for-stock exchange.
CIT shareholders will receive 0.6907 Tyco shares for each share of CIT. The transaction is valued at $35.02 per share to the CIT shareholders, or approximately $9.2 billion, based on Tyco's March 12, 2001 closing price on the New York Stock Exchange of $50.70 per share. The transaction will be immediately accretive to Tyco earnings. Tyco has entered into a purchase agreement with The Dai-Ichi Kangyo Bank, Limited for their approximately 71 million shares of CIT (which constitutes approximately 27% of the outstanding shares) at a price of $35.02, in cash, per CIT share.
"For years, our operating managers have advocated creating a financing capability within Tyco to support the growth of our businesses," said L. Dennis Kozlowski, Tyco's Chairman and Chief Executive Officer. "After evaluating several paths to this goal, including developing a financing capability in-house, we concluded that acquiring CIT gives us a faster, more efficient and more robust solution at lower risk than anything we might have done internally or through joint-venture or other approaches. Putting in place a fully established leader in the commercial finance industry is the ideal platform for us to fulfill this need."
"CIT is a very attractive growth company in its own right and will be its own profit center. It is also an ideal fit for Tyco and will add great value to our businesses as part of a total package we can offer customers," continued Mr. Kozlowski. "CIT has a strong credit culture, an excellent customer base, and a broad range of services that match up well with the full range of our financing opportunities. This acquisition will enable us to capitalize on significant organic growth opportunities within CIT and in each of our businesses. CIT will enable us to deliver better working capital management to enhance our already strong cash flow and financial leverage to greatly increase Tyco's capital efficiency. Further, it will give us the ability to meet the current and emerging financing needs of our customers, solidify customer relationships by enabling us to move toward lifetime customer management in several Tyco units, and create a platform for future growth and opportunity."
"The CIT acquisition is a cornerstone transaction consistent with significant past acquisitions of premier franchises such as Kendall, Sherwood, Davis & Geck, US Surgical, Mallinckrodt, Grinnell, Keystone, ADT, AMP, and Raychem," added Mr. Kozlowski. "In each case, we expanded the Tyco model to include an adjacent business and we built that business into a world leader in its respective market. We expect that the acquisition of CIT will provide similar ongoing positive benefits to the shareholders and customers of CIT and Tyco."
Albert R. Gamper, Jr., Chairman, President, and CEO of CIT said, "This transaction provides exceptional value for our shareholders and allows CIT shareholders to participate in the future growth of Tyco. Like Tyco, we have leadership positions in key industry sectors, a highly diversified revenue stream, and strong operating platforms. The combination of our diversified product offering and customer base with Tyco's financing opportunities, growth prospects, and detailed industry knowledge enhances our competitiveness and access to capital. CIT will continue to access funding markets independently and maintain its strong credit ratings. That's why our Board and management team are very excited by the opportunities the combination with Tyco presents for both companies, our investors, and our customers." Mr. Gamper will remain with Tyco as CEO and President of CIT, and will join Tyco's Board of Directors.
Accelerating Organic Growth
Tyco envisions utilizing CIT's financial capabilities across the full breadth of its operations:
"Strong drivers for the demand of water and wastewater systems throughout the world, from Clean Water Act compliance in the U.S., to aging systems in Europe, to infrastructure development in Asia and South America, coupled with a shift from public to privately financed systems is creating an enormous market for companies with the ability to design, build, finance and operate these systems in an integrated model," said Diane Creel, President of Tyco's Earth Tech division. "Today, we are a world leader in this industry, but we have been constrained in our ability to provide prospective customers with a complete package that includes financing. Access to this resource through CIT will create a compelling growth story through our ability to capture additional water project market opportunities."
Neil Garvey, President of TyCom, said, "The strong demand outlook for undersea bandwidth continues to exceed our expectations and forecasts. TyCom is the undisputed leader in providing undersea fiber optic networks to help meet this demand. As our business model has shifted to include bandwidth sales, our ability to offer financing will be a significant competitive advantage. Along with these bandwidth sales, as our TyCom Global Network is constructed as a global undersea backbone, the need for regional feeder systems will accelerate. Evidence our contracts with C2C, Bezeq, and DishNet DSL, all signed during the past 6 months. The capability to provide turn-key solutions, including project financing, for these regional feeder networks will be a key driver of the growth of our third-party systems business."
"The ability to couple our product offering with financing and promote long-term customer affiliations will significantly enhance our growth prospects," said Juergen Gromer, President of Tyco Electronics. "This customer relationship creates possibilities for product upgrades and replacements in areas such as our Tyco Power Systems and M/A-COM business."
Mike Snyder, President of Tyco's ADT Security business said, "The ability to offer on-the-spot financing or leasing options to both qualified commercial and residential customers creates an opportunity to leverage the relationship with our over 3 million customers in the U.S. For example, the services offered by CIT's Vendor Technology Financing operation provide us an excellent life cycle management tool, giving us the ability to harvest our loyal customer base with systems enhancements and upgrades as security technology evolves as well as offering a variety of other financial products."
The transaction, which will be accounted for as a purchase, is contingent upon customary regulatory review and approval by CIT shareholders. The Boards of Directors of both companies have approved the transaction, which is expected to be tax-free for the shareholders of CIT. Under the terms of the agreement, CIT's shareholders will receive Tyco stock in a fixed exchange ratio of 0.6907 for each share of CIT.
Conference Call
L. Dennis Kozlowski and Albert Gamper, Jr. will be discussing the merger on a conference call today at 8:30 am EST. The toll-free phone number for U.S. callers is (800) 288-8975. The number for international callers is (612) 332-0725. The call will also be webcast at the following site: investors.tycoint.com/medialist.cfm.
CIT is a leading, global source of financing and leasing capital for companies in more than 30 industries. Managing more than $50 billion in assets across a diversified portfolio, CIT is the trusted financial engine empowering many of today's industry leaders and emerging businesses, offering vendor, equipment, commercial, factoring, consumer and structured financing capabilities. Founded in 1908, CIT operates extensively in the United States and Canada with strategic locations in Europe, Latin and South America, and the Pacific Rim.
Tyco International Ltd. is a diversified manufacturing and service company. Tyco is the world's largest manufacturer and servicer of electrical and electronic components; the world's largest designer, manufacturer, installer and servicer of undersea telecommunications systems; the world's largest manufacturer, installer and provider of fire protection systems and electronic security services, and the world's largest manufacturer of flow control valves. Tyco also holds strong leadership positions in disposable medical products, diagnostic imaging, bulk pharmaceuticals, wound closure, plastics and adhesives. Tyco operates in more than 100 countries and has expected fiscal 2001 sales of $37 billion.
