The company’s its board of directors unanimously approved this plan to separate into three different publicly traded companies. These are also expected to be tax-free spin-offs for its shareholders.  ITT is spinning off its water-related businesses and its Defense & Information Solutions segment.  Under the plan, ITT shareholders will own shares in all three corporations after the completion of the transaction and the company expects to complete the plan before the end of the year. ITT will continue to trade as an industrial company in aerospace, transportation, energy and industrial markets.

As a manufacturer of highly engineered industrial products and high-tech solutions: ITT’s global platform will include ITT’s current Industrial Process business, as well as its Motion Technologies, Interconnect Solutions and Control Technologies businesses. It will have an extensive portfolio of advanced technology industrial pumps, valves and control systems serving the oil and gas, mining, chemical, power generation, and pulp and paper markets. ITT will also continue in specialized and harsh-environment connectors, aerospace valves, actuators and components, shock absorbers, brake pads and other energy absorption solutions.  Nearly 60% of its revenues are from international operations and emerging markets and pro forma 2011 revenue for the future ITT Corporation is estimated at $2.1 billion.

A global water technology leader: A standalone water technology corporation will be here with a new corporate brand name will be formed through the combination of three of ITT’s current businesses: Residential & Commercial Water, Flow Control and Water & Wastewater (including biological, filtration and disinfection treatment and analytics). The portfolio will span the transport, testing and treatment of water and will focus on residential, commercial, municipal, agricultural, construction, building services, dewatering, beverage and leisure marine markets, as well as analytical instrumentation for water and wastewater, environmental, medical and beverage applications. Approximately 55% of the water unit’s revenues come from international markets and it shows strong emerging market growth prospects.  Pro forma 2011 revenue for the future water technology business is estimated at $3.6 billion.

A highly engineered defense technology and information solutions provider: The existing Defense & Information Solutions segment will be renamed and rebranded as a new company servicing the global military, government and commercial customers; and products and services will include next generation night vision, integrated electronic warfare, networked communications, force protection, radar, global intelligence, surveillance and reconnaissance systems, composite structures, space-based satellite imaging, weather and climate monitoring, and navigation and imaging systems, as well as maintenance, engineering and professional services.  Nearly 30% of revenues are already coming from adjacent markets outside of the Department of Defense, such as air traffic management, information and cyber-security as well as strong international growth prospects.  Pro forma 2011 revenue for the new defense and information solutions business is estimated at $5.8 billion.

Right before the open, ITT shares are up 20% at $63.62 after a $52.78 close.  This move may be factoring in all the great news at once.  Its pre-pop market cap was $9.7 billion and its prior 52-week range was $42.05 to $57.99.  ITT shares peaked at roughly $70 in 2007 and it is interesting that analysts had a consensus price target of only $58.81 before this action was announced.

Tyco International Ltd. (NYSE: TYC) broke itself up in 2007 and its shares are just now back at close to the same level at $43.59 today.  Tyco’s performance was, of course, affected by the Great Recession, and that makes it more difficult to compare.  Ditto for the Tyco Electronics, Ltd. (NYSE: TEL) unit.

Fortune Brands Inc. (NYSE: FO) just announced its plan for a sale or break-up in November.  In that move, its shares went from roughly $54 to $58 on the news, but shares now sit above $62.00 for a total gain of roughly 15% from start to present.

We can’t really draw a parallel between ITT and Tyco other than that their charts now look very similar if you factor in the big ITT gains from this morning.  The problem is that many of those analyst calls should consider a sum of the parts scenario and the stock is now above the consensus price target range of analysts.  That being said, it sure looks like most of the goodwill and reward is being given to shareholders all at once.

Gabelli & Co. reiterated its “Buy” rating.  What will stand out in the Gabelli call is that it lists a fair market value of $89.00 for 2011.  If that $89 target holds true, then our take that the gain is being fully realized will have an opportunity cost associated with it.  As a reminder, rising tides (i.e. the stock market) tend to lift all vessels (i.e. stocks).

Another manufacturing conglomerate is playing Devo, and there is now yet one more great special situation for value and growth investors alike.

JON C. OGG

Tyco has traded independently of both Tyco Electronics, Ltd. (NYSE: TEL) and Covidien plc (NYSE: COV) since June 2007.  The market cap for the company was $18.3 billion as of last night, which will require fund managers to buy millions of shares.

Tyco Electronics, Ltd. (NYSE: TEL), with an $11.8 billion market cap, is into engineered electronic components, network solutions, specialty products, and undersea telecommunication systems.  At $26.57, its 52-week trading range is $20.90 to $32.98.  It started trading in the high-$30′s in early 2007.

Covidien plc (NYSE: COV), with a $19.3 billion market cap, is into healthcare products and medical devices for use in clinical and home settings.  At $38.59, its 52-week range is $35.59 to $52.48.  It started trading in the mid-$40′s in early 2007.

Tyco International (NYSE: TYC) started out of the chute after the spin-offs around $53.00, and that figure is now just under $50.00 if you account for dividend payments made since. Average volume is over 5.9 million shares per day and the only thing that may prevent the volume from going the roof today is that it is a late-August Friday and many professional investors and traders have decided to skip out for a long weekend (or longer).  Shares are up 5% at $38.60 right before the open on only about 150,000 shares.

JON C. OGG

Some names under consideration that have either been rumored to be in deals or which could potentially be in future M&A deals are Brocade Communications Systems, Inc. (NASDAQ: BRCD), Cincinnati Bell Inc. (NYSE: CBB), CommVault Systems, Inc. (NASDAQ: CVLT), Dell Inc. (NASDAQ: DELL), JDS Uniphase Corporation (NASDAQ: JDSU), Leap Wireless International Inc. (NASDAQ: LEAP), MetroPCS Communications Inc. (NYSE: PCS), MEMC Electronic Materials Inc. (NYSE: WFR), Novell Inc. (NASDAQ: NOVL), Premiere Global Services, Inc. (NYSE: PGI), RadioShack Corp. (NYSE: RSH), Tellabs Inc. (NASDAQ: TLAB), Teradata Corporation (NYSE: TDC), OmniVision Technologies Inc. (NASDAQ: OVTI), and Synaptics Inc. (NASDAQ: SYNA).

For starters, most of the companies listed as targets here are possible bolt-on mergers rather than super-mergers.  Closing a mega-deal by the end of the year that has not been announced is going to be tough, and that likely means that the capital gains and the effects of the old Bush tax rates on capital gains will be either gone or muted in 2011.  Businesses today are willing to spend cash for companies that can be easily integrated or that open up new and untapped markets for them.  As far as a giant taking on another giant and then having to make divestitures and many layoffs, those deals are far less attractive for companies right now.  Then there is the notion of a tougher regulatory approval environment for large mergers that has to be considered.

The list of companies we have provided falls into at least two of three distinct categories.  The first category is that the company has been either a target or acquirer and a deal fell through.  The second category is that the company has either been rumored to be in a merger or it is a company that is one we have viewed as a shoe-in target for the right acquirer.  Lastly, there is the bolt-on deal or at a minimum a tool-box deal to make these easy for a buyer to gobble up.

We have compiled a list of predators and prey here for your review in the technology, telecom, and communications sectors.  This list is displayed alphabetically to avoid any ranking issues or any more pointed issues over size and the real chances of a deal coming into play.

One name which used to come up routinely is Brocade Communications Systems, Inc. (NASDAQ: BRCD).  This was one of our picks for stocks which could still double, and the buyout thesis for a low-cost provider in networking and storage was a part of why we thought the stock could double.  The short-term moves are not working in favor of holders, so it would seem no deal is imminent even if shares are at $5.15.

Cincinnati Bell Inc. (NYSE: CBB) is one of the last of the “anything remotely tied to the Bells” stocks, although it has always been its own boss.  It is the main telecom player for Cincinnati and its nearby areas located in Ohio, Indiana and Kentucky, making this a potential bolt-on acquisition for a larger telecom player.  It has almost the same exact operational area as its license back to the end of the 1800′s with a 25 mile radius around Cincinnati.  The small $615 million market cap would make this a line-item for a buyer, but it is worth noting that both AT&T and Verizon are going to have a harder and harder time under regulatory review in making acquisitions.  With shares at $3.06, the 52-week trading range is $2.50 to $3.74.

CommVault Systems, Inc. (NASDAQ: CVLT) is on sale due to its disappointing guidance this week.  The 21% drop to $18.50 would not likely make any lower-premium buyout more likely to be approved as the 52-week range is $15.60 to $24.51.  That recent high is an all-time high though and a Goldman Sachs strategist had this as a potential buyout candidate earlier this year.  Its Simpana platform aims to help enterprises manage data growth while cutting costs and adding security via cloud integration, deduplication, recovery, efficiency, virtualization, remote and branch office integration, and more.  Valuations are an issue, although the 21% drop leaves a market cap at just about $800 million.

Aixtron AG (NASDAQ: AIXG) Started as Buy at Sterne Agee
Annaly Capital Management, Inc. (NYSE: NLY) Started as Buy at Wunderlich Securities.
Anheuser-Busch InBev (NYSE: BUD) Started At Overweight By HSBC
AvalonBay Communities Inc. (NYSE: AVB) Started as Buy at Jefferies; Raised to Outperform at Morgan Keegan.
Berkshire Hathaway Inc. (NYSE: BRK-A) Cut to Sell from Hold at Stifel Nicolaus.
Equity Residential (NYSE: EQR) Started At Buy By Jefferies
Potash Corp. of Saskatchewan (NYSE: POT) Cut target ($105) and estimates at CIBC.
Tyco Electronics Ltd. (NYSE: TEL) Started as Underweight at J.P. Morgan.
Cree Inc. (NASDAQ: CREE) Started as Buy at Sterne Agee
Flextronics International Ltd. (NASDAQ: FLEX) Started as Overweight at J.P. Morgan
Jabil Circuit Inc. (NYSE: JBL) Started as Overweight at J.P. Morgan
Potash Corp. of Saskatchewan (NYSE: POT) Cut target ($105) and estimates at CIBC.
Skilled Healthcare Group, Inc. (NYSE: SKH) Cut to Hold at Jefferies; also cut late yesterday at JMP Securities and at Credit Suisse after the stock imploded.
Tyco Electronics Ltd. (NYSE: TEL) Started as Underweight at J.P. Morgan
Veeco Instruments Inc. (NASDAQ: VECO) Started as Buy at Sterne Agee

JON C. OGG

Akamai Technologies (NASDAQ: AKAM) Cut to Hold at Jefferies; Cut to to Neutral from Buy at Merriman Curhan Ford.
Digital River (NASDAQ: DRIV) Cut to Hold at Deutsche Bank.
Infineon (NYSE:IFX) Raised to Buy at RBS.
Leap Wireless (LEAP) Cut to Neutral at RW Baird.
MetroPCS (NYSE: PCS) Cut to Neutral from Outperform at RW Baird…
NetLogic (NASDAQ: NETL) Cut to Neutral from Outperform at RW Baird.
SAP AG (NYSE: SAP) Raised to Hold from Sell at Societe Generale.
Tyco Electronics (NYSE: TEL) Raised to Buy from Neutral at UBS.

Jon C. Ogg
July 30, 2009

Charles Schwab Corp. (NASDAQ: SCHW) boosted its buyback plan Thursday by approving an additional $500 million in buybacks, making the total buyback amount $619 million. Charles Schwab’s market cap is $23.6 billion.

DiamondRock Hospitality Co. (NYSE: DRH), a real estate investment trust (REIT), announced on Monday that up to 4.8 million shares were approved for repurchase. $1.24 billion is their current market cap.  It isn’t unique, but REIT’s rarely repurchase shares compared to other sectors because they have to distribute most of their income.

Liberty Media Capital (NASDAQ: LCAPA) has approved $1 Billion in repurchases of Liberty Entertainment common stock and $300 million of Liberty Capital common stock on Monday. Their market cap is $1.95 Billion.

QUALCOMM Inc. (NASDAQ: QCOM) approved a $2 Billion buyback plan Tuesday. The program will replace a $3 Billion buyback that currently had $2 million remaining. The current market cap for QUALCOMM is $64.9 Billion.

Timberland Co. (NYSE: TBL) authorized on Monday another 6 million shares for repurchasing. The apparel and footwear company currently has 1 million shares left from its previous 6 million share repurchase program. They have a market cap of $816 million so this would retire close to another 10% of its stock.

Tyco Electronics, Ltd. (NYSE: TEL) also upped its buyback plan on Thursday by $500 million, reaching $1.25 billion in authorized repurchases. Since September, Tyco Electronics has repurchased $512 of its common stock. Market cap sitting at $15.7 billion.

Rachel Lopez
March 14, 2008

First, let’s look at the spin-off companies.  Tyco Electronics (NYSE: TEL) traded at $39.81 on a dividend adjusted basis at the end of July 2 and have fallen down to the mid to low-$30′s before a recent recovery. But even north of $37.00 shares are still down.  Tyco Electronics has a equally mixed coverage spread between Buy/Hold and an average price target of roughly $41.00 from analysts.  Covidien (NYSE: COV), the medical products entity, shares traded at $43.24 on a dividend adjusted basis at the end of July 2 and have traded in mostly in a high-$30′s to mid-$40′s basis since.  With a $44+ handle this one still has a mixed verdict depending upon whom you ask.  Covidien has a mixed opinion from a thin group of analysts and an average price target of roughly $47.50.  It seems that offspring aren’t being thought of as great growth vehicles.

But back to Tyco International Ltd. (NYSE: TYC).  Tyco International shares took a serious hit in late 1999, but they recovered sharply and hit new highs in 2001.  By early 2002 the accounting scandals and the Koz issues came full circle and shares were crushed.  On an adjusted basis the stock lost more than two-thirds of its value.  2003 to the end of 2004 were great years to own shares, but this hasn’t really been the case since then.

Back before these spin-offs were completed, we noted how there appeared to be a phantom premium in Tyco shares just because of the hype around the break-up and because of the craze surrounding private equity and shareholder initiatives.  What appears to have happened is that now the street has given it a more proper valuation or at least a more realistic one, and as we noted not all bad stories have to have sad endings.

On an adjusted basis Tyco International (NYSE:TYC) shares were over $50 at the July 1 date, but they have never been back.  Shares trade around $40 now and have been as low as $38-ish over recent weeks.  If you trust the "average price targets" from analysts, that appears to be around $50.00 from a much smaller group than in prior years.

Just last week a court approved some $3.2 Billion in investor class action law suit settlements over the accounting fraud took the company down.

We do caution against using any solid earnings forecasts because many analysts have not fully adjusted their opinions to reflect the "new" Tyco in a post spin-off world.  First Call has Fiscal September-2008 EPS at $2.61 (a 15.5 forward P/E ratio) and fiscal September-2009 EPS at $3.24 (a 12.5 forward P/E ratio), although we still question some of these since the spin-offs.  If the company can achieve those estimates, then there are few who could argue against this being one of the better value plays out there.

Most of our "turnaround stocks that haven’t turned around" are troubled companies in troubled predicaments that may have a very hard time making a turnaround come to fruition.  But Tyco may be one of the exceptions.  That phantom premium may be in the rear view mirror.  Its value is also now easier to see since the spin-offs have been completed and are basically two quarters on their own.  Who knows, maybe 2008 to 2009 will be Tyco’s time to shine.

Jon C. Ogg
December 28, 2007

If you want to see our previews for IPO’s, spin-offs, merger-arb, reorganization, and more, you can sign up for our free email distribution list.  If you want detailed information with actionable trading information along with ideas for hedging risk, you can sign-up for our Special Situation Investing Newsletter with much more detail, projections, and an expected time-line.

Jon C. Ogg
October 3, 2007

Before the Tyco (NYSE:TYC) break-up we had many inquiries for higher and higher price targets on Tyco, but the fundamental problem was that no matter how we crunched those numbers the math just didn’t work for Tyco’s stock price at the time.  We even called it a ‘phantom premium running Tyco shares’ ahead of the event because investors were too much in love with the private equity, mergers, and break-ups at the time.  That stock had a phenomenal run from last summer to this summer as the deal was quite well telegraphed, but nonetheless there existed a phantom premium. 

The remaining Tyco International Ltd. (TYC-NYSE) after a 1:4 reversesplit is down marginally at $53.00.  It opened at $52.92 Monday andhave managed to close up north of $53.00 per share each day since.Unfortunately each close has been slightly lower than the day before.

Tyco Electronics (TEL-NYSE) is trading at $39.30, barely above the opening price on Monday at $39.20.  Shares have briefly traded over $40.00 since the spin-off, but based on the trading activity it looks like the specialist was more than happy to give shares away there.

Covidien Ltd. (COV-NYSE) is up an entire penny today at $42.21 and have traded down from roughly a $43.00 open (conflicting opening prices).  It looks like the specialist was more than eager to give away shares at $43.00.

In all fairness, shares of other conglomerates haven’t exactly been lighting up the road: General Electric (GE-NYSE) has seen shares stuck in a $38.00 to $38.79 range for the last week, and 3M (MMM-NYSE) has seen only an $87.13 to $88.40 range in the same time.

Jon C. Ogg
July 6, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.