Pentair: Merger Creates Long Term Value
Shares of Pentair ( PNR ) are rallying after the diversified industrial manufacturing company is merging with Tyco's Flow Control business making it the largest player in its sector. Shares hit an all time high of $48.77 in the morning before falling back to $46 near the close, still up 15% on the day.
The deal
The deal is rather complicated. Pentair is buying Tyco's ( TYC ) Flow Control in a deal which values the division at $4.6 billion. Under the deal current shareholders of Pentair will hold 47.5% of the shares of the combined company and shareholders of Tyco will hold the remainder. The actual deal is called a "reverse Morris trust" in which Tyco (which is headquartered in Switzerland) will actually buy Pentair, with its headquarters in the US, in order to avoid US tax liabilities.
On completion of the deal Pentair will increase the product line of valves and control systems of Tyco and boost its presence in Asia, according to Pentair's CEO Hogan. Furthermore the companies expect annual synergies of around $250 million.
