The parent company of plastic film and sheet major Tyco Plastics and Adhesives Group is buying finance company CIT Group Inc. to help fund growth and provide customer credit.
Tyco International Ltd. has agreed to swap stock to buy CIT, the largest independent commercial finance company in the United States. CIT counts many plastics companies as customers and is known for its annual, midyear analysis of the U.S. plastics industry economy.
L. Dennis Kozlowski, Tyco chairman and chief executive officer, said his firm has evaluated ways to create internal financing capability. It decided 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," he said in a March 13 news release.
Tyco, based in Pembroke, Bermuda, and with operational headquarters in Exeter, N.H., said it will use CIT's financial resources across all its operations. It cited several businesses that could benefit from CIT's financial strength, including Tyco's water and waste- water systems, its fiber-optics business, Tyco Electronics and its ADT Security business.
The firm did not point out specifically the benefits to its film and sheet business, but Tyco spokeswoman Maryanne Kane said CIT will represent growth opportunity for all Tyco divisions. The film and sheet business represents a relatively small part of the company's expected sales of $37 billion for fiscal 2001.
Tyco Plastics of Nantucket, Mass., had film and sheet sales of $900 million for the year ended Sept. 30. It was tied for fourth-largest North American film and sheet maker in Plastics News' ranking last fall.
The film and sheet operation has been acquisition-minded even when relying on conventional sources of financing. This year it bought Pactiv Corp.'s polyethylene industrial and institutional packaging business. Its purchases last year included PE film and bag producer Mohawk Plastics Inc., plastic liner and cutlery maker Amcel Corp. and film extruder North American Plastics Corp.
Tyco Plastics includes major plastic hanger producer A&E Products of Secaucus, N.J., and Ludlow Coated Products, a Homer, La., coater, laminator and producer of flexible packaging.
CIT of New York manages more than $50 billion in assets across a broad portfolio. It issues annual forecasts for plastics and other industries.
CIT Chairman, President and Chief Executive Officer Albert Gamper told analysts that after the merger, CIT will jettison $6 billion worth of underperforming assets in financing the trucking, manufactured housing and recreational vehicle sectors.
The firms estimate the value of the agreed-on transaction at about $9.2 billion, based on Tyco's March 12 share closing price on the New York Stock Exchange. Most CIT shareholders will get about 0.69 Tyco shares per CIT share. However, Dai-Ichi Kangyo Bank Ltd., which holds about 27 percent of CIT shares, will get $35.02 cash per share. Kane said the parties expect to complete the deal by mid-July.
Gamper said in a news release that the transaction, which offers a 54 percent premium over CIT's former share price, provides exceptional value for shareholders and allows them to participate in the future growth of Tyco. The merged companies said their relationship will resemble that of General Electric Co. and its GE Capital subsidiary.