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Associated Press
ITT Corp. splitting into 3 separate
companies
Associated Press, 01.12.11, 06:06 PM EST
WHITE PLAINS, N.Y. -- ITT Corp., a company that began
making telephone equipment in 1920 and grew into a massive
conglomerate, said Wednesday it will split itself into three
publicly traded companies.
The White Plains, N.Y., company that makes products ranging
from brake pads to night vision goggles said the breakup would
create an industrial products business, another focused on
defense and information solutions and a third company making
water technology products. ITT ( ITT - news - people ) expects
the division to be complete by the end of the year.
It said it was making the split in
hopes that its shareholders would
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find the three businesses are more
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valuable as separate companies.
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Steve Loranger, ITT chairman,
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president and chief executive, said
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the board felt it was time to "unlock
SHARE
the value" of the three businesses,
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which he said each have leading
products and market positions,
skilled employees and value-generating potential.
"Each new company will be more nimble and able to build
stronger, more intimate customer relationships to accelerate
mutual success," he said in a statement.
The market applauded the plan. ITT shares climbed $8.72, or
16.5 percent, to close at $61.50, having risen to a 52-week
high of $64 earlier in the session.
Real-Time Quotes
ITT is following a route that's
01/12/2011 3:59PM ET
ITT
$61.5016.52%
TYC
$43.88 1.57%
MSI
$37.99 -1.02%
FO
$62.50 0.77%
MORN
$53.26 -0.06%
become increasingly popular for
conglomerates. In 2007, scandalplagued Tyco International
Ltd. ( TYC - news - people )
transitioned from an unwieldy
conglomerate into three separate,
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public companies, while kitchen
and bath products company
American Standard also broke
into separate pieces. More recently, Motorola ( MOT - news people ) Inc., the 82-year-old consumer electronics pioneer,
http://www.forbes.com/feeds/ap/2011/01/12/business-telecommunications-no-b-us-itt-corp-separation_8253592.html?boxes=Homepagebusinessnews[1/12/2011 8:23:01 PM]
ITT Corp. splitting into 3 separate companies - Forbes.com
just this month split into two companies. And consumer
products maker Fortune Brands Inc. ( FOPRA - news people ) announced plans in December to split into three
companies, keeping its liquor business led by Jim Beam
bourbon while shedding the units that make Titleist golf balls,
Moen faucets and Master Locks.
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hampered by the
company's defense
division, which accounts for
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about half its annual
revenue but has relatively
dim prospects because of
upcoming defense budget
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cuts, said MorningStar Inc.
analyst Anil Daka. The water division, meanwhile, looks rosy
as states and municipalities invest in aging infrastructure that
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dates back to World War II.
"As the population grows, the demand for clean water only
becomes that much more going forward," Daka said.
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the value of its annual sales, Daka said. That pulled down the
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company's overall stock value to about 11 times its annual
revenue, even though it should be trading at around 15 times
the value when the water business is factored in, he thinks.
ITT's split would be the second major breakup in the
company's 90-year history. In 1995, ITT divided its massive
operations into three parts: its hotel and gaming business,
insurance and its manufacturing companies.
ITT got its start in 1920 as the Puerto Rico Telephone Co.
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Created by the brothers Sosthenes and Hernand Behn, the
company set a goal of building the first comprehensive global
system of telephone lines. In the 1960s and 1970s, the
company went on an acquisition binge, buying another
company as often as once a week. In just 10 years, it grew
from a medium-sized business with $765 million in annual
sales to a conglomerate with yearly sales of $17 billion.
By 1977, the company had acquired more than 350 companies
including Sheraton hotels, Avis Rent-a-Car and the maker of
Wonder Bread. Under CEO Rand Araskog, it began a
restructuring that led to the 1995 split.
In explaining the move announced Wednesday, ITT said its
engineered products division, which makes valves and pumps
for everything from planes to food production lines, will keep
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the ITT name. That business also makes products for the oil
and gas, mining, chemical power, and pulp and paper
http://www.forbes.com/feeds/ap/2011/01/12/business-telecommunications-no-b-us-itt-corp-separation_8253592.html?boxes=Homepagebusinessnews[1/12/2011 8:23:01 PM]
ITT Corp. splitting into 3 separate companies - Forbes.com
industries. ITT's Chief Financial Officer Denise Ramos will be
CEO of that company. It expects that business to have about
$2.1 billion in revenue this year.
The water technology business will include ITT's residential
and commercial water, flow control and wastewater
businesses, which makes products used in water transport,
testing, and treatment. Gretchen McClain, the president of
ITT's fluid and motion control business, will be the CEO of the
new company.
The business is expected to report $3.6 billion in revenue in
2011.
The third company is ITT's biggest - its defense and
information solutions business. That unit makes a wide range
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of defense products from night vision technology to satellite
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imaging. David Melcher, the president of the business, will
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become the company's CEO, and ITT director Ralph Hake will
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become chairman of the board.
ITT forecasts the defense business will have about $5.8 billion
in revenue for the year.
The separations will be tax free spinoffs. ITT said its board of
directors has approved the plan. Its shareholders will own stock
in all three companies once the plan is complete.
Copyright 2011 The Associated Press. All rights reserved. This
material may not be published, broadcast, rewritten or
redistributed.
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