Deal Talks Between Tyco and Schneider Are 'Fluid'

The chances that an acquisition of Tyco by France’s Schneider are declining, according to people close to the situation.


While Schneider said early Wednesday morning that it was not currently in discussions to buy Tyco, as I reported Tuesday, the two companies have held discussions about such a transaction and people on both sides of those talks believed progress toward a deal was being made.

The leaks of the talks however, appear to have jolted the talks off track—as they resulted in a significant hit to Schneider’s stock price, while sending shares of Tyco north.

With Schneider's statement of no “current” talks, its stock is up, while Tyco’s is down.

Given that Schneider is not in the flow control or home security business, two key drivers of Tyco’s cash flow, Schneider investors were somewhat dubious about their company making a huge, cross-border purchase of Tyco.

Now, as one person close to the talks told me, "We have a very fluid situation that could go either way.” That is either back towards making a deal or further away from it.

Regardless of whether talks are restarted between Tyco and Schneider, it does appear that Tyco is a willing seller.

The question is whether any other potential buyers will step up. Both Honeywell and United Technologies have been considered potential bidders, but both companies face impediments to a deal. One is Tyco’s low tax rate, the result of its incorporation in Switzerland—that tax rate would go up for either Honeywell or UTX, forcing them to find further synergies or cost saves in any deal.

As well, while both have businesses that line up well with Tyco, both have some questions on the anti-trust front.

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