Tyco to merge flow controls unit with Pentair Tyco International, the US industrial conglomerate, said on Wednesday that it would merge its flow controls business with Pentair, the water filtration and thermal management company, in an all-stock deal that values the unit at about $4.9bn, including debt. Tyco is in the middle of separating itself into three companies in an effort to boost its share price and analysts have long speculated that the moves would make it easier for suitors to buy or merge with the standalone companies. Ed Breen, chief executive of Tyco, told investors on a conference call that the merger would give the combined company the size and heft to prosper in its sector and would create value that the Tyco unit could not generate on its own. "[The business] will be a premier global leader in flow, filtration and equipment protection with a comprehensive product portfolio and a stronger presence in high-growth geographies and end markets," he said. On Wednesday, Tyco said that the Pentair transaction would push back certain regulatory filings relating to its broader split-up but added that it remained on track to complete those spin-offs, and the merger, by the end of September. The combined company will be called Pentair, be based in Switzerland and will generate revenues of about $7.7bn from its 100 or so manufacturing sites and about 30,000 employees. Tyco Flow Control makes valves and controls for the energy and industrial sectors as well as pipes for water systems, while Pentair sells commercial and residential water filtration systems and products to protect and cool electrical systems. "[The merger] is a positive as it will establish a global leader in flow control with leading positions across several markets and diversified end-market exposure," said Ajay Kejriwal, with FBR Capital Markets, adding that the valuation implied that Tyco as a whole could be worth about $70 a share. Pentair shares jumped about 14 per cent to $46.23 in mid-morning trading. Over the year to date, Pentair shares have climbed about 40 per cent. Tyco shares, meanwhile, rose about 4 per cent to $55.71 and are up about 20 per cent since the start of the year. As part of the deal, Tyco shareholders will receive about 52.5 per cent of the combined company. The merger values Tyco's unit at about 8.8 times forecast 2012 earnings before interest, tax, depreciation and amortisation. Pentair has a market capitalisation of about $4.6bn. Management expects the merger will create about $250m in annual cost and tax savings within three years and will add about $0.40 to the new Pentair's earnings per share in 2013. The transaction takes advantage of a complex structure known as a "reverse Morris Trust" that is designed to help companies avoid paying tax on mergers and acquisitions that meet certain specific criteria. Tyco will spin off its flow unit to shareholders and then immediately merge the business with Pentair, whose management will run the combined company. Tyco will appoint two members to the board. Mr Breen noted that only about 20 reverse Morris Trusts have been completed in the past five years because of certain legal criteria that mean the in effect seller, in this case Tyco, must receive more than 50 per cent ownership of the new entity. It just was kind of one of those unique moments in time where it just works out perfectly for both sets of shareholders. But it isn't going to happen often a deal like that," Mr Breen told investors.