Pentair to Spin Off Its Electrical Business

Mar 27, 2018

Manufacturer Pentair Plc plans to spin off its electrical business into a separate publicly traded company to focus on its core business of making water treatment equipment. Beth Wozniak, currently President of Pentair’s electrical unit, will become CEO of the newly spun-off company.

Pentair’s electrical business, which makes stainless steel, aluminum and nonmetallic enclosures that guard sensitive electrical and electronic equipment, reported sales of US$2.1 billion in 2016. This business, to be separated in a tax-free spinoff to Pentair shareholders, will be named at a later date, Pentair said.

Pentair Plc shares were up 3.3% on Tuesday afternoon at US$68.26, a nearly two-year high.

“We have two businesses that have critical masses and are top-of-class in terms of profitability,” Randall Hogan, Pentair’s chairman and chief executive officer, said in an interview. “We looked at whether they would be viable independently, how their shares would trade, and this is the best way to drive shareholder value and give employees as much opportunity as possible.”

The company, whose board of directors includes representation by activist hedge fund Trian Fund Management LP, has shed non-core businesses to improve performance.

The UK-based company last month sold its valves and controls business for US$3.15 billion in cash to U.S. factory automation equipment maker Emerson Electric Co.
After spinning off its electrical business, Pentair will be left with its water business, which reported sales of US$2.8 billion in 2016. The company’s water treatment equipment is used in swimming pools and spas, aquaculture farms and laboratories, and the food and beverage industry. The business also makes pumps and filtration systems used in flood control and the oil and gas industry.

Pentair expects one-time separation costs of about US$100 million to US$125 million related to the spinoff, which is estimated to close in the second quarter of 2018.
Pentair Chief Financial Officer John Stauch will become the company’s chief executive after the spinoff, and Karl Frykman, President of Pentair’s water unit, will become the company’s Chief Operating Officer.