DealZone

No me-too breakup for Pentair, CEO says

February 1, 2011

Word from ITT Corp last month that it plans to break itself up into three public companies got many on Wall Street salivating — surely more breakups, and fees would follow.

ITT, which makes water filtration systems, industrial components and defense equipment, joined a wave of corporate breakups that has also washed over Fortune Brands, Motorola and Sara Lee.

But fellow diversified U.S. manufacturer Pentair is one company that has little interest in following in ITT’s footsteps, chief executive Randall Hogan told analysts on a conference call on Tuesday, despite the similarities between the companies, each of which has a large water filtration business.

General view of "Foucault's Pendulum" during a ceremony at the Pantheon, October 5. The 28 kg metal sphere is suspended on a 67 metre steel wire from the dome of the Pantheon and recreates the experiment conducted by Leon Foucalut in 1851. Foucault's pendulum demonstrates the rotation of the earth. At rear near candle are (L-R) French Culture Minister Philippe Douste-Blazy, Education Minister Francois Bayrou, and State Minister for Research Elisabeth Dufourq. REUTERS/John Schults

General view of "Foucault's Pendulum" during a ceremony at the Pantheon, October 5. The 28 kg metal sphere is suspended on a 67 metre steel wire from the dome of the Pantheon and recreates the experiment conducted by Leon Foucalut in 1851. Foucault's pendulum demonstrates the rotation of the earth. At rear near candle are (L-R) French Culture Minister Philippe Douste-Blazy, Education Minister Francois Bayrou, and State Minister for Research Elisabeth Dufourq. REUTERS/John Schults

“We don’t just talk about those things at the board level because ITT does something. We talk about that all of the time,” Hogan said, whose company also has a technical products arm that makes electronic components used by the telecommunications and energy industries. “We like the two businesses we’re in.”

To Hogan’s mind, Minneapolis-based Pentair did all the breaking up it needed to in 2004 when it sold its tool business to Black & Decker.

“They are the analogous situation,” Hogan said of ITT. “Power tools traded at a low are multiple because we didn’t control our destiny there right? Home Depot and Lowe’s controlled our destiny. So we crafted a strategy to double water and exit power tools at the same time, but I would say that the strategic motive for that was the same ITT sees. They have a defense business which is dragging down the multiples of the other two businesses.”

If ITT is following business’ yin in breaking itself up, Black & Decker last year succumbed to corporate yang and was bought by rival Stanley Works. The pendulum swings both ways.

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