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Tyco Spent $8 Billion On Undisclosed Deals

Feb 4, 2002 | UPI

Tyco International Ltd. spent $8 billion on more than 700 acquisitions during the last three years that were not disclosed to the public, The Wall Street Journal reported Monday

The Journal said that Tyco executives gave details of the deals to the paper in response to questions raised after a special alert the company sent to investors last week.

The alert followed questions by some investors as to why debt at Tyco nearly doubled last year to $21.6 billion while the company was reporting $4.8 billion of free cash flow.

The company's financial reports clearly state a "net" amount of cash paid for all acquisitions, Tyco Chief Financial Officer Mark Swartz told the paper, but said that the details of the deals were not disclosed because they were too small to be considered material at a company with annual revenue of $36.2 billion.

Swartz said investors would not be able to discern the amount spent on the small deals, because the company does not disclose the amount of cash on the balance sheets of the company it acquires.

That cash is subtracted from the net acquisition that the company does disclose, but calculating the unannounced deals requires that it be added back, the Journal reported.

The company may provide extra detail on acquisitions in future financial filings.

Meanwhile, the Bermuda-based company, which makes everything from burglar alarms to plastic hangers, said it would repurchase $4.5 billion of its debt and its Tyco Capital unit had taken steps toward independence including going back to its CIT brand name.

The company said it would finance the repurchase of the debt by borrowing from its existing $5.9 billion bank facility, and that the resulting higher interest rate would trim 2002 earnings by 2 cents per share.

Chairman and Chief Executive L. Dennis Kozlowski said the move would provide Tyco with more flexibility and liquidity and answer questions that have been raised about its ability to finance its plan to split into four parts.

Kozlowski also said, in a statement, free cash flow would be over $4 billion in fiscal year 2002, and the money would mainly be used to repay debt.

Its Tyco Capital unit also said on Monday it had taken steps to prepare for its initial public offering as a company, including establishing new credit facilities of its own totaling $3 billion.

The timetable for distribution of the rest of the unit to shareholders would be moved up to about 45 days following its initial public offering, the company said.

The company also said Tyco Capital would revert to the name CIT, which it was called until Tyco took over the company last June.

Tyco announced plans last month to split into four companies. That plan followed complaints that its accounting was difficult to understand, particularly in relation to acquisitions.

The collapse of energy trader Enron Corp. amid questions about its own accounting practices has placed new emphasis on financial disclosure practices.


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