|Shares Out. (in M):||469||P/E||16.6x||13.7x|
|Market Cap (in $M):||12,475||P/FCF||16.6x||13.5x|
|Net Debt (in $M):||1,038||EBIT||1,037||1,241|
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We recommend buying Tyco when-issued stock at current levels (~$26.50):
1) 20% return to stand-alone fair value over 12 month investment horizon in a high-quality name that should received renewed investor focus as a pure-play fire & security company
2) Potential for Schneider Electric to come back to bid for standalone TYC-w
Simply put, at current levels you can buy a great business for 8x forward EBITDA, 13.5x forward P/E (20% cheap to fair value over a year) with a free call option on a Schneider takeout at a potential 50% premium. Downside case of ~10% presents highly skewed risk / reward.
Tyco International (TYC) is again separating into three entities: ADT (being spun-off), Flow Control (being merged with Pentair via a Reverse Morris Trust) and Tyco (RemainCo). The spin-off will be effective September 28; TYC-w and ADT-w began trading on the when-issued market last Monday, September 17, 2012.
While most investor attention seems to be focused on ADT, we believe TYC RemainCo represents a more attractive risk-reward.
Valuation & Risk / Reward
Capital Structure, Free Cash Flow, Use of Balance Sheet
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