Tyco International, the Bermuda-based conglomerate that owns Graphic Controls Corp. in Buffalo, agreed today to buy Scott Technologies, the Cleveland-based company that runs Scott Aviation in Lancaster, for about $400 million in stock.
The deal will allow Tyco to expand its fire and security services business, which had $6.1 billion in sales last year for its line of fire-protection and security systems, by adding Scott's line of respiratory systems used by firefighters and the aviation industry.
"Scott provides Tyco with a high-quality product line that is an excellent extension of our fire-protection business," said L. Dennis Kozlowski, Tyco's chairman and chief executive officer.
Scott's Aviation business, which has been the slower growing of the company's two main operations, employs about 425 people at its factory at 225 Erie St. in Lancaster.
Officials from Scott and Tyco could not be reached to comment Monday morning.
But Mark A. Kirk, Scott's president and chief executive officer, said in a statement that the trend toward consolidation in the life support products industry means that size will become a more important factor in the coming years.
"With our industry entering a period of significant consolidation, size and scale will be increasingly important," Kirk said. "Therefore, we decided to seize this opportunity to become a part of Tyco, a strong company with a diverse product offering and substantial international market reach."
Scott shareholders will receive Tyco stock worth $23 for every share of Scott stock they own. That's 1.6 percent less than Scott's closing price of $23.39 on Friday and 7.5 percent below its six-month high of $24.88 on Dec. 18.
Scott's stock fell 69 cents to $22.69 in mid-morning trading.
"This transaction allows us to further enhance value and liquidity for our stockholders, who will have the opportunity to participate in the future of Tyco," Kirk said.
Scott's products, which generated about $255 million to $260 million in sales last year, will be added to Tyco's fire and safety business, which makes more than 60 brands of equipment that are distributed worldwide.
Many of Tyco's fire and safety business' customers also buy equipment from Scott, which should allow Tyco to offer complementary products through the same sales channel, Kozlowski said.
The deal is expected to add to Tyco's earnings from the start. Scott's profits from continuing operations rose 36 percent to $18.9 million during the first three quarters of last year.
Scott's health and safety business, which is based in Monroe, N.C., increased its net sales by 54 percent during the first nine months of last year because of stronger sales of its Scott Air-Pak breathing apparatus and several recent acquisitions.
Scott's aviation business in Lancaster increased its net sales by 7 percent during the first three quarters of last year, mostly because of its December 1999 acquisition of Av-Ox Inc., a company that services aviation oxygen systems.
Tyco, an acquisitive company that is based in Bermuda and run from executive offices in Exeter, N.H., is the world's biggest maker of fire-protection and security systems. It also is the world's biggest manufacturer of electronic connectors and underseas telecommunications systems.
Tyco's sales rose 29 percent to $28.9 billion in sales last year.