Tyco to Buy Valve Maker Keystone in Latest Purchase

Tyco International Ltd. on Wednesday said that it agreed to buy industrial valve maker Keystone International Inc. for $1.2 billion in stock in a plan to boost sales and profit with acquisitions.

The latest purchase by Exeter, N.H.-based Tyco, a maker of industrial and medical products, marks the sixth acquisition announced this year. Tyco has agreed to pay more than $8 billion in stock and cash for its 1997 purchases, an amount equal to about 75% of Tyco’s market value of $10.5 billion.

Investors have endorsed Tyco’s acquisition program, sending the stock up 18% this year. Tyco said that bringing Keystone into its stable of companies will provide “immediate positive earnings.”

“Part of Tyco’s growth strategy is to make non-dilutive acquisitions, and that’s not going to change,” said Jean-Claude Gruet, a money manager at Phoenix Duff & Phelps, which owned more than 600,000 Tyco shares at the end of 1996. The Keystone purchase “looks to be very much in line with the acquisitions in the past,” Gruet said.

Tyco said it will pay Keystone shareholders in Tyco stock worth $34 a share, or 66% more than Keystone’s closing price of $20.50 on Tuesday. Shareholders of Houston-based Keystone will receive 0.54183 share of Tyco for each Keystone share.

On the New York Stock Exchange, Tyco shares fell $1.125 to close at $61.625, while Keystone stock zoomed up $10.625 to close at $31.125.

Keystone, which had net income of $41.9 million on revenue of $677.9 million in 1996, sells its products to the food, beverage, water and sewage, petroleum production and refining industries, among others.

Tyco, which makes valves, fire safety equipment and disposable medical products, had net income of $310.1 million on revenue of $5.1 billion in fiscal 1996, ended June 30.

“The combination of Keystone with Tyco’s Flow Control Group creates the premier, worldwide company in the valve industry,” Tyco Chairman and Chief Executive Dennis Kozlowski said in a statement.

In May, Tyco agreed to buy Inbrand Corp., a maker of adult incontinence products, for $320 million in stock. In April, the company agreed to purchase AT&T; Corp.’s undersea fiber-optic cable unit for $850 million in cash. In March, Tyco said it would buy ADT Ltd., a maker of electronic security systems, for $5.6 billion in stock.

The Keystone acquisition, which will be accounted for as a pooling of interests, requires a customary regulatory review and approval by Keystone shareholders. The purchase should close in September.