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Tyco Shares Go Up as Exec Tries to Reassure Investors

BLOOMBERG NEWS

Tyco International Ltd., roiled by concerns that the company’s accounting hasn’t been transparent, on Wednesday altered its breakup plan and provided assurances the conglomerate isn’t facing a cash crunch.

Chief Executive Dennis Kozlowski canceled a share sale for Tyco’s finance unit and said he would consider buyout offers for all its businesses. The company expects to announce a buyer for its plastics group by April and may delay initial public offerings of the healthcare and fire protection and industrial divisions that are scheduled to be spun off.

Tyco shares, which had lost half of their value since the breakup was unveiled two weeks ago, rose $2.82, or 12%, to $25.92 on the New York Stock Exchange. Prices of Tyco’s bonds climbed.

“We are not in a panic mode,” Kozlowski said on a conference call with analysts and investors. “There is a crisis in confidence in Tyco, but there is no crisis in reality.”

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Even so, C.R. Bard Inc. said after the close of trading on the New York Stock Exchange that it would terminate its sale to Tyco because of the collapse of the shares.

Tyco agreed in May to buy the medical products maker for about $3.2 billion, or $60 in stock for each share of Bard. There isn’t a breakup fee.

Tyco’s finance costs increased and its credit ratings were downgraded this week after Tyco drew down bank loans to repay short-term corporate IOUs. Tyco Capital, which is reassuming the CIT brand name, may be hampered from making loans unless it separates quickly from Tyco, investors said.

Tyco wants to spin off or sell the finance unit within three months. It had planned to sell shares before the spinoff.

Kozlowski also said Tyco’s profit might be as much as 45 cents a share less than the company’s $3.70 a share forecast for the fiscal year ending Sept. 30 because of the switch to the bank loans, slumping demand for electronics and costs associated with “internal distractions” in the last few weeks.

“Drawing down the bank lines gives us the funds we need to pay off commercial paper and maturing debt over the next year,” Kozlowski said. “Another benefit of the bank [lines] is it makes us less susceptible to various market rumors that we have a liquidity issue--which we don’t.”

Kozlowski is reversing a strategy of growth through acquisitions amid speculation the company used purchases to mask slowing results. On Monday, Tyco said it had made 700 acquisitions valued at about $8 billion in the last three years that weren’t fully disclosed to the public. Tyco plans to file more detailed information with the Securities and Exchange Commission and issue statements about every purchase if requested.


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