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Pentair, the UK-domiciled, US-based industrial company, has announced plans to break into two business through a tax-free spin-off its electrical systems business.
The decision comes about 18 months after the founding partner of activist US hedge fund Trian, which has built a large stake in Pentair, had joined the company’s board urging it to grow by acquiring rivals in the diversified industrial sector.
But the decision unveiled on Tuesday suggests the company did not succeed in pursuing a growth strategy and instead has decided to break-up.
The separation of the electricals business is expected to be completed in the second quarter of 2018 and the unit which generated sales of $2.1bn in 2016 will be renamed.
Last year, Emerson Electric agreed to buy Pentair’s valves and controls business for $3.15bn.
Randall Hogan, Pentair’s chairman and chief executive, will join that business as chairman. Meanwhile, Pentair’s existing business will focus on becoming a leader in the water and fluid processing applications business.
The surviving Pentair business had sales of $2.8bn last year. The company’s chief financial officer John Staunch will become its chief executive and a current director David Jones will become chairman.
Mr Hogan said:
Separating Water and Electrical to create two pure-play companies is the next logical step in the evolution of Pentair and is consistent with our strategy to continually enhance shareholder value.
Both companies will have the focus, talent and flexibility to grow profitably, both organically and through acquisitions.
As Pentair’s second largest shareholder with approximately 14.3 million shares, Trian strongly supports the decision by the Pentair board to separate into two publicly traded companies.
We believe this transformative transaction will result in two industry leading companies that will be well-positioned for growth and long-term shareholder value creation.
Shares in Pentair have risen nearly 14 per cent over the past 12 months, but are underperforming the S&P 500 in that period.