Tyco Agrees to Buy Raychem for $2.87 Billion

Tyco International Ltd., a top manufacturer of fire alarms, undersea fiber optic cables and other items, said Wednesday that it will buy electronic components maker Raychem Corp. in a cash and stock deal valued at $2.87 billion.

The deal would solidify Tyco’s position as the world’s No. 1 supplier of electrical and electronic connectors, a position it took recently with the $12.22-billion acquisition of AMP Inc.

The offer values Raychem at $37 a share, a 19% premium to its closing price Tuesday of $31.13.

Under terms of the agreement, Hamilton, Bermuda-based Tyco would pay Raychem shareholders $1.4 billion in cash and 16.1 million of newly issued Tyco shares and assume $400 million in debt. Both companies’ boards have unanimously approved the deal.

Tyco Chief Executive Dennis Kozlowski said the acquisition would add immediately to earnings and would give Tyco opportunities to cut costs and boost growth through an expanded product line, new customers and marketing efficiencies.

Separately, Tyco agreed to acquire the undersea cable unit of Telefonica, Spain’s largest telecommunications company, for $280 million.

Kozlowski has overseen more than $25 billion in acquisitions in the last two years, turning his company into a leader in its markets.

Tyco became the world’s No. 1 maker of security and fire systems after its 1997 purchase of ADT Ltd. for $7 billion, and No. 1 in underwater telecommunications systems following its $850-million purchase of AT&T; Corp.’s undersea cable unit.

Tyco, which has its main office in Exeter, N.H., expects revenue of more than $22 billion in the fiscal year ending Sept. 30. Two years ago, its annual revenue was $8.1 billion. Menlo Park, Calif.-based Raychem had revenue of $1.8 billion last year.

In New York Stock Exchange trading, Raychem shares surged $5.13 to close at $36.25 and Tyco shares jumped $4.13 to close at $93.50.