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Sale of position in Tyco affects Iridian’s portfolio

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Nov. 27 2019, Updated 3:04 p.m. ET

Iridian Asset Management and Tyco International

Iridian Asset Management traded notable positions in the third quarter. It initiated new stakes in Graphic Packaging Holding Company (GPK), Altera Corporation (ALTR), and Timken Company (TKR). The fund also sold its shares in Health Net, Inc. (HNT), Tyco International Ltd. (TYC), and SeaWorld Entertainment (SEAS). During 3Q14, the fund increased its position in Phillips 66 (PSX) and NCR Corporation (NCR) and decreased its position in Dresser-Rand Group Inc. (DRC) and Avis Budget Group, Inc. (CAR).

Iridian sold its position in Tyco International Ltd. (TYC), which accounts for 1.90% of the fund’s second quarter portfolio.

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Tyco, world’s largest fire protection and security company

Tyco International Ltd. (TYC) is the world’s largest pure-play fire protection and security company. Tyco provides more than three million customers around the globe with the latest fire protection and security products and services. A company with $10+ billion in annual revenue, Tyco has more than 57,000 employees in more than 900 locations across 50 countries. It serves various end markets, including commercial, institutional, governmental, retail, industrial, energy, residential, and small business.

Tyco’s revenue up on organic growth

Tyco reported generally accepted accounting practices (or GAAP) diluted loss per share of $0.17 from continuing operations for the fiscal fourth quarter of 2014. Revenue in 4Q14 increased 4%, to $2.7 billion, compared to the previous year’s quarter of 3% organic growth, led by the Global Products segment that had organic growth of 8%. Acquisitions contributed 1% point of growth, which was partially offset by the impact of divestitures.

Diluted earnings per share (or EPS) from continuing operations before special items increased 19% for the fourth quarter and 20% for the year due to continued productivity initiatives and capital allocation.

The company recorded charges totaling $465 million in the quarter ended September 26, 2014, related to legacy asbestos liabilities, including $225 million related to an agreement in principle to settle Yarway claims and $240 million in non-Yarway liabilities.

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Tyco’s segment performances are positive

Tyco’s segment performances for 4Q14 are listed below.

  • North America Installation and Services. Revenue for 4Q14 increased 2% over the previous year quarter, led by 6% installation revenue growth that was partially offset by a 2% decline in service.
  • Rest of World Installation and Services. Revenue for 4Q14 increased 2% over the previous year quarter. Organic revenue growth of 2% consisted of 6% growth in installation, partially offset by a 2% decline in service revenue. Acquisitions contributed 2% to revenue growth, which was offset by the impact of divestitures.
  • Global Products. Revenue for 4Q14 increased 9%, including a 1% benefit from acquisitions. Organic revenue grew 8%, with growth across all three product platforms.

Inorganic growth expected to generate revenue

During 3Q14, Tyco International completed the acquisition of a commercial and residential security business in Belgium. In 4Q14, the company completed the purchase of  a residential security business in Brazil. Both acquisitions totaled approximately $45 million in cash. On an annualized basis, these businesses are expected to generate revenue of approximately $35 million.

Tyco repurchases shares in 2014

During the fourth quarter of 2014, Tyco International Ltd. (TYC) repurchased 23 million shares, or $1.0 billion, during the quarter, bringing the full-year total to 42 million shares repurchased for $1.8 billion. Since the close of the fiscal fourth quarter, the company repurchased 10 million shares for $417 million. The company now has $1.0 billion remaining on its share repurchase authorization.

In the next section of the series, we will discuss Iridian Asset Management’s exit position in SeaWorld Entertainment (SEAS).

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