Tyco International's plan to split into three companies later this month will leave them in a strong position to do deals or divest more businesses, Edward Breen, Tyco’s chief executive, said in an interview with CNBC's Erin Burnett.
The new companies will be "huge" in their own right with strong balance sheets, Breen explained. Tyco has whittled down the company's debt to about $10 billion -- spread across the three pieces -- from about $30 billion. And all three companies have "good cash flow generation," he said.
"We've split the debt among the three companies, so all three have a very strong balance sheets," Breen told CNBC. "All the companies can now go out and do whatever deals they want to."
On June 29, each Tyco shareholder will receive one share of the company's health care business, which is being named Covidien, and one share of Tyco Electronics, for every four common shares of Tyco International held at the close of business June 18, the company said. Once the distribution is complete, every four common shares of Tyco International will be converted into one share in a reverse stock split.
Breen will continue to lead Tyco, whose portfolio will include the fire and security and engineered products segments, including the ADT home alarm business. Rich Meelia will head Tyco Healthcare, which is being renamed Covidien, while Tom Lynch will be CEO of Tyco Electronics.
As for the new Tyco, Breen said the company will divest certain parts of the business that don't mesh with their new strategy. Breen also said he wants to expand the ADT business both in North America, where its residential security business holds a 15% market share, as well as "around the globe." Breen said they're also open to doing more acquisitions within its commerical security business.
"What I love about the new Tyco International (is that) we have three world leading positions, yet they are very fragmented markets so it’s a big opportunity," Breen told CNBC.
Former chief Dennis Kozlowski, who in 2005 began serving a prison sentence for looting Tyco, proposed a break-up in 2002. Those plans were put on ice as Tyco worked to repair its image, which had come to be defined by a notorious $6,000 shower curtain and a $15,000 umbrella stand bought for Kozlowski with company funds.
Tyco Electronics and Covidien have filed to list their common stock on the New York Stock Exchange and the Bermuda Stock Exchange under the trading symbols "TEL" and "COV," respectively.