Tyco Laboratories, Inc.
Tyco Laboratories, Inc.
One Tyco Park
Exeter, New Hampshire 03833
Fax: (603) 778-7700
Tyco Laboratories is a diversified manufacturer of fire-protection and flow-control equipment, packaging materials, and electrical and electronic components—primarily printed circuit boards and underwater cable products. Over the years Tyco has acquired a number of long-established firms whose product lines have evolved from the technological developments of the 20th century. Tyco itself has been transformed from a small technology company to a diversified design and manufacturing corporation.
In 1960, with a science Ph.D. from Harvard, Arthur J. Rosenberg, opened a research laboratory in Waltham, Massachusetts, and did experimental work for the government. Two years later Rosenberg incorporated Tyco Laboratories and branched into the commercial sector. He assembled a team of top researchers and Tyco developed high-tech products for the marketplace.
Tyco’s early technological breakthroughs included a silicon carbide laser. This laser was the first blue-light laser and the first to fire a non-stop beam, all at room temperature. Other successful research projects led to the marketing of the Dynalux battery charger, a device which would never overcharge a battery. It had many industrial applications. Other advances came in fluid controls, microcircuitry, and fuel cell catalysts.
Rosenberg established an ambitious growth schedule for his company. To fill the gaps in its development and distribution network, Tyco began to acquire other companies. In 1965, Tyco began a spree of acquisitions which drastically changed the make-up of the company. In 1966, the company bought Industrionics Control, Inc., adding to other recent purchases of Mule Battery Manufacturing Company and Custom Metal Products, Inc. The next year, Tyco acquired the North American Printed Circuit Corporation, General Nucleonics Corporation, and Bytrex, Inc. In 1968, Electralab Electronics Corporation; Air Spec, Inc.; Explosive Fabricators Corporation; Dynaco Inc.; Coating Products, Inc.; and Digital Devices, Inc. were acquired. Accurate Forming Company, CBM Realty Corporation, Linear Corporation, Micro-Power Corporation, and Custom Products Inc. were added to the group in 1969. Tyco’s sales increased from less than $1 million in 1963 to more than $41 million for all of its companies by 1969.
This dazzling growth, however, did not occur without complications. By the end of the 1960s, Tyco Laboratories needed a major reorganization to put its new units in order. The price of company stock had dropped dramatically from its peak in the mid-1960s, as Wall Street became disillusioned with high-tech companies. Tyco divested a number of unprofitable units in 1969, and assessed its corporate direction.
In 1970, the Tyco board quietly eased out founder Arthur J. Rosenberg, replacing him temporarily with Joshua M. Berman, a partner in the law firm Goodwin, Proctor, and Hoar, and a director of Tyco Laboratories. In September 1971, Ralph W. Detra took over as president, while Berman remained chairman and CEO. Detra resigned one year later, and Tyco was without a president until April 1973, when the Tyco board appointed Joseph P. Gaziano chairman, president, and CEO.
Gaziano, a graduate of the Massachusetts Institute of Technology, had held a number of positions at the Raytheon Company before leaving in 1967 to run Prelude Corporation, a lobster-fishing concern. Gaziano launched a new era for Tyco Laboratories. During his tenure the company became much larger and more diverse, making acquisitions on a much grander scale than earlier. In January 1974, the stock of Tyco Laboratories was listed on the New York Stock Exchange, and four months later Gaziano completed Tyco’s most ambitious acquisition thus far—the $22 million cash purchase of the Simplex Wire and Cable Company.
Simplex specialized in undersea cable, and had its beginnings when Charles A. Morss began manufacturing wire bird cages and fire screens at his firm, Morss and White, in the 1880s. As the revolution in electricity created new uses for wire products, the company adjusted its product lines to include insulated wire. In 1890, the firm changed its name to the Simplex Electrical Company, and it was incorporated five years later, focusing solely on the production of electrical cable. In 1900, Simplex laid the longest underwater telephone cable in the country, across the five-mile strait between Mackinaw City and St. Ingnace, Michigan. The cable lasted 31 years beneath the frigid Great Lakes waters.
In the 1920s, a pair of Simplex scientists discovered that the proteins present in natural rubber were the cause of water absorption, and in 1926 patented a process to remove the proteins. The resulting Anhydrex cables were successfully marketed—lightweight, moisture resistant cables.
During World War II, Simplex began producing submarine cable for the U.S. Navy and U.S. Coast Guard. By the end of the war cable production had increased three-and-one-half times. The company continued to do research for the military even after the war, and a location with greater security was acquired for the submarine-cable division. Located on the banks of the Piscataqua River in New Hampshire, the submarine-cable division became Simplex’s flagship operation.
Throughout the 1950s and 1960s, Simplex grew due to technological developments in cable production. New products like flexible pipeline and sodium conductor cables were introduced. In 1966, Simplex began offering installation of undersea cables for the first time.
While Simplex competed with manufacturing giants like Western Union and Anaconda Wire and Cable in the conventional wire and cable markets, it had a lead in the underwater cable market. This specialization was one of the factors that made it attractive to Tyco Laboratories.
In September 1975, shortly after the Simplex acquisition, Tyco purchased the Grinnell subsidiary of International Telephone and Telegraph, (ITT). Grinnell was the market leader in automatic sprinklers. ITT had been ordered by federal courts to divest the fire-protection-equipment and piping manufacturer on antitrust grounds. Tyco president Joseph Gaziano took the opportunity to purchase a well-established company at a reasonable price.
Originally founded in Providence, Rhode Island, in 1850 as the Steam and Gas Pipe Company, Grinnell operated with a member of the Grinnell family high in the corporate hierarchy until the late 1940s. The company began business installing Providence’s original gas mains, then operated as a plumbing supplier. Before long its major product became the automatic sprinkling system, a product with which it has led the market ever since.
In 1892, the company was incorporated as the General Fire Extinguisher Company and grew steadily, manufacturing hydrant piping, steam and water heating equipment, iron fittings, brass products, and sundry mill supplies. In 1923, the company was reincorporated, while retaining the same name.
By 1929, humidifying equipment had been added to its product lines. On the eve of the Depression the company employed 4,000 people and had assets of almost $18 million. Over the next few years, however, the number of employees dropped to 2,650, and assets dropped to $12 million at the end of fiscal 1934. General Fire Extinguisher’s stock traded at $7 per share in 1934, compared to $45 in 1930.
During World War II, the majority of the company’s resources were applied to war production. In April 1944, General Fire Extinguisher changed its name to the Grinnell Corporation. War production had a rejuvenating effect on the company. By the end of 1944, Grinnell employed 6,000 workers and assets were up to $20 million.
In the 1950s, Grinnell diversified into the central station alarm business, which monitors burglar and fire alarms in subscribers’ buildings 24 hours a day. In 1949, Grinnell bought a controlling interest in the Automatic Fire Alarm Company, an overseer of automatic fire-protection systems in New York City, Boston, and Philadelphia. In 1950, Holmes Electric Protective Company, which supplies burglar alarm services primarily to banks in New York City, Philadelphia, and Pittsburgh was acquired. Three years later, Grinnell purchased a majority holding in the American District Telegraph Company, the largest central station alarm company in the United States.
In 1961, the Justice Department filed an antitrust suit against Grinnell and three subsidiaries, charging that the four companies had conspired to monopolize the central alarm business, and seeking to force the divestiture of the three subsidiaries—Holmes Electric Protective Company, Automatic Fire Alarm Company, and American District Telegraph. As a result of the trial in 1964, federal judge Charles E. Wyzanski ruled against Grinnell, and ordered that the company “cease and desist” from violating the Sherman Antitrust Act, divest all of its stock in the three central alarm companies, and banned Grinnell’s president, James D. Fleming, from corporate leadership. Grinnell appealed, charging that the judge both failed to comprehend the case, and was biased.
The controversial case found its way to the Supreme Court, where the ruling was upheld in 1966. In January 1968, Grinnell divested itself of the three subsidiaries, whose shares were spun off to Grinnell stockholders. Since the subsidiaries’ earnings were never consolidated with Grinnell’s, the company’s balance sheet was not seriously affected. Indeed, Grinnell’s own fire-protection and piping business had grown significantly in the 1960s.
In August 1969, Grinnell share-holders voted in favor of a merger with International Telephone and Telegraph despite antitrust suits filed by the United States Justice Department to prevent the acquisition. The merger, however, was doomed. In 1971, federal courts, citing antitrust violations, gave ITT two years to divest itself of Grinnell. The deadline passed without a suitable bid, and ITT put the company under the stewardship of a court trustee in September 1973. After two losing years, Grinnell began to operate at a profit again, and was purchased by Tyco Laboratories.
Tyco paid $14 million and agreed to pay ITT 40% of Grinnell’s net earnings for the next ten years, with a minimum payment of $28.5 million. At the time of the acquisition, Tyco’s total sales were $58 million, overshadowed by its new subsidiary, Grinnell, whose turnover was $107 million.
Tyco began its third major acquisition in November 1976 when it bought 13% of the Philadelphia-based process-control designer and manufacturer, Leeds & Northrup Company. Through a press release Tyco announced its intention to buy more of Leeds & Northrup’s stock. Leeds & Northrup filed suit in federal court, claiming that Tyco’s press release was in effect an illegal tender offer and that Tyco had not filed the necessary documents with the Securities and Exchange Commission. Tyco agreed to halt its purchase of the stock temporarily, but over the next two years president and CEO Gaziano waged one of the most convoluted hostile takeover battles in corporate history.
Tyco’s agreement to stop buying Leeds & Northrup stock was dependent on the latter company’s continued independence. Leeds & Northrup president, David Kimball, began issuing new shares, and arranged for the Milwaukee-based Cutler-Hammer Inc. to buy 9% of Leeds & Northrup stock as a hedge against further encroachment from Tyco. Gaziano protested, but could do little; Tyco was prevented by a court-approved agreement from gaining more than 19% of Leeds & Northrup until March 1978. In January 1978, Tyco gave up its attempt to acquire Leeds & Northrup, and sold its 19% interest to Cutler-Hammer for a $9.2 million profit.
Two months later Tyco bought 8.5% of Cutler-Hammer Inc., which now controlled 33.5% of Leeds & Northrup. By June, Tyco had 28.4% of the Cutler-Hammer shares. Gaziano then raised $25 million through debentures in the Eurodollar market, and increased Tyco’s holding in Cutler-Hammer to 32%. Meanwhile, the Koppers Company, a chemical and engineering firm, accumulated 21% of the stock, erecting a formidable roadblock to Tyco’s gaining a majority interest in Cutler-Hammer.
Joseph Gaziano responded by selling Tyco’s 32% holding in Cutler-Hammer at a profit to the Eaton Corporation, a heavy-equipment manufacturer that planned to merge with Cutler-Hammer, stipulating that Eaton would spin off the Leeds & Northrup shares to Tyco.
Eaton quickly made a tender offer of $261 million for the remaining Cutler-Hammer shares, a bid its board could not refuse, but at the last minute Cutler-Hammer sold the coveted 33.5% holding in Leeds & Northrup to General Signal Corporation. General Signal immediately announced its plan to merge with Leeds & Northrup. After a 20-month effort Gaziano failed to acquire Leeds & Northrup. “It just wasn’t meant to be,” he told Forbes magazine in 1978. Nevertheless, Tyco netted $12.9 million from the transactions.
Gaziano continued to pursue his goal of making Tyco a $1 billion company by 1985. In September 1979, Tyco bought the Armin Corporation for $27 million. Armin was a leader in the production of polyethylene films, products used primarily in packaging.
Armin was incorporated as the Armin Poly Film Corporation in 1967 by Armin Kaufman, a Hungarian immigrant who had come penniless to the United Stated in 1955. The plasticfilm maker grew quickly and in 1969, Armin acquired Poly Version, Inc. and the E. Gluck Trading Company through stock exchanges. The Gluck acquisition represented a departure for the company from its main product line. Gluck made watches that sold in retail markets in the $10 to $50 price range under the Sutton, Chateau, Precision, Adventura, and Andre Rivalle labels. In 1975, digital watches with price tags ranging from $100-$ 150 were introduced under the Armitron and Quasar label. These electronic watches were Armin’s first attempt at manufacturing the timekeeping parts of watches itself.
In the mid-1970s, over half of Armin’s sales and about 70% of profits came from plastic films. New products like film for sealing tapes, urethane foam sheet-molding compounds, and shrink wrap added to profits in the mid-1970s. Armin’s Thermodynamics Corporation subsidiary, acquired in 1973, introduced a new Roto Extrusion process for its main product line—plastic pellets—promising better quality and lower costs.
Armin Corporation proved a profitable acquisition for Tyco Laboratories and Gaziano increased the company’s share of the lucrative packaging market through the acquisition—in 1981—of the Ludlow Corporation, a manufacturer of packaging and other materials.
Ludlow dated back to 1868. The company was engaged in the import of jute from India for the manufacture of twines, carpet yarns, furniture webbing, cords, and other textile products at its Ludlow, Massachusetts, plant. In 1916, Malcolm B. Stone became president of Ludlow, and remained head of the corporation until 1957. Stone greatly expanded the operations of the company, buying a jute processing mill near Calcutta in 1920, giving Ludlow first choice of that country’s jute crop.
In 1957, Austin B. Mason succeeded Stone. Mason, seeing that Ludlow’s products were dependent on one commodity, jute, initiated a broad diversification program. Ludlow began producing paper specialties, including printed chart paper for scientific and military electronic equipment, coated papers, pressure sensitive papers, and gummed packaging paper products. Rubber and vinyl products for the automotive, shoe, and carpet industries also became a major part of Ludlow’s product mix. By 1966, jute production, which had accounted for 90% of Ludlow’s product lines ten years earlier, made up just 20% of sales.
In 1969, Ludlow entered the profitable mobile home market, a growing segment of the housing market at that time. Carpeting and home furnishings were added, and by 1971, made up more than half of Ludlow’s sales. Ludlow’s carpets, marketed under the Ludlow and Walters label, were priced at the high end of the market. Ludlow’s Forest Products subsidiary, based in Tennessee, produced a variety of non-upholstered furnishings. The company grew throughout the 1970s on the strengths of its diverse operations.
When Tyco Laboratories purchased Ludlow in 1981 for $97 million, Ludlow needed some streamlining. The company sold unprofitable units producing furniture, jute backing, textiles, and bags. Its specialty paper units enjoyed strong markets in medical applications and other technologically advancing fields.
In 1982, Joe Gaziano died suddenly at the age of 47. Tyco Laboratories entered a new period under the leadership of John F. Fort. Fort had risen through the ranks of the Simplex Wire and Cable Company, and was president of that firm at the time of the Tyco takeover. His style differed markedly from Gaziano’s.
Fort disposed of Tyco’s corporate jets and apartments, and trimmed the corporate staff to 35. He concentrated on making Tyco’s existing businesses more profitable. He instituted a compensation program under which employees were rewarded in proportion to the profits their units generated. Fort organized Tyco’s subsidiaries into three main units: the fire-protection and plumbing division, which consisted of Grinnell Corporation; the electronics division, made up of Simplex Wire and Cable and the Tyco Printed Circuits Group; and the packaging division, made up of Armin and Ludlow.
Tyco made smaller acquisitions in the mid-1980s, including Micro-Circuit, Inc.; Hersey Products, Inc.; a water meter manufacturer, Atcor, Inc.; a pipe manufacturer; and 48 ITT production and distribution facilities worth $220 million.
In 1987, Tyco’s sales passed the $1 billion mark. Tyco’s Grinnell subsidiary paid $350 million in 1988 for the Mueller Company, a 132-year-old water and gas pipe manufacturer. The acquisition was expected to make a significant contribution to the fire-protection and flow-controls division.
In 1989, Fortune magazine ranked Tyco Laboratories ninth in “total return to share-holders over the last 10 years.” Tyco’s three main areas of business were producing solid returns and appeared to have excellent growth potential. Pending legislation requiring better fire protection in publicly used buildings promised an expanded market for Grinnell, already contributing 63% of Tyco’s sales by the end of the 1980s. Simplex Wire and Cable was the world’s leading producer of undersea cables. The Printed Circuit Group focused on the high end of the market, delivering circuit boards in smaller batches with higher prices. Tyco Laboratories, completing its own third decade, has centuries of accumulated experience behind its well-established subsidiaries.
Armin Corporation; Ludlow Corporation; Grinnell Corporation; Hersey Products, Inc.; Simplex Wire and Cable Company; Tyco Engineered Systems, Inc.; Tyco Holdings Corporation; Atcor, Inc.
Green, Leslie, and J. Richard Elliot Jr., “Cause for Alarm: The Story of the Anti-Trust Suit Against Grinnell Corp.,” Barron’s, May 30, 1966.
—Thomas M. Tucker