For Scott Technologies officials, merging with Tyco International Ltd. gives the respiratory systems maker the size it needs to compete in a consolidating industry.
For Tyco, the Bermuda-based conglomerate that owns Graphic Controls Corp., the $400 million deal gives it access to a wide range of new products that are expected to fit nicely within the world's biggest fire-protection and security systems business.
But for Scott's roughly 425 workers at its Scott Aviation facility at 225 Erie St. in Lancaster, the deal announced Monday means uncertainty. Neither Tyco nor Scott officials were willing to discuss how the Lancaster-based aviation business, which has been the slower growing of the company's two main operations, will fit in with Tyco's operations once the merger is completed.
"It's just too early to tell," said Judith Czelusniak, a Tyco senior vice president.
"We're so early in the process that I don't have any local flavor to add," said Robert Berick, a Scott spokesman.
Berick said Scott officials believe the merger is essential if the Cleveland-based company, despite a better than 20 percent sales growth rate over the last three years, is to be able to compete effectively in an industry that now is being swept by a wave of consolidation.
"Size and scale are going to be important in our markets going forward. Being part of Tyco should help with that," Berick said. "We wanted to maintain our relevance in the market."
Czelusniak said Tyco wanted Scott because its life support respiratory products complement the more than 60 different brands of fire protection and detection systems and products it makes through its $6 billion fire and security services business. "This acquisition gives us products that we really value," Czelusniak said. "Since we share customers and have complementary products, it was really a good fit."
The deal, which will pay Scott shareholders $23 in Tyco stock for each Scott share that they own, is expected to close by April, Czelusniak said.
But the purchase price, which was 1.6 percent less than Scott's $23.39 closing price on Friday, disappointed some analysts and investors, who labeled the deal a "take-under" and said the company should have been worth $25 to $30 per share. Scott's stock fell 81 cents to $22.56, while Tyco shares rose $1.10 to $61.38.
Berick declined to comment of the purchase price or to discuss how the deal came about.
Scott, which had $264 million in sales last year, traces its roots back to Lancaster, where the company began as a small machine shop called Uniloy Accessories Corp. that made tailwheel assemblies for aircraft.
The company won a contract from the British government to make oxygen regulators for fighter aircraft during World War II and developed its famous Scott Air-Pak breathing apparatus after the war along with other emergency oxygen breathing equipment for commercial aircraft. Scott has more than 60 percent of the market for commercial aviation oxygen systems worldwide.
Scott's faster-growing health and safety division, which has been located in Monroe, N.C., since 1980, is the leading manufacturer of self-contained breathing apparatus, with about a 50 percent share of the North American market.