Fortive to spin off Precision Technologies, focuses on growth By Investing.com

Fortive Corp (NYSE: ) unveiled plans to execute a tax-free spin-off of its Precision Technologies segment, resulting in two independent, publicly traded companies. This strategic move aims to establish businesses with focused business models and distinct investment and capital allocation strategies.

Fortive Chairman and CEO James A. Lico highlighted the company’s growth and innovation over the past eight years and emphasized that the spin-off will allow Fortive to focus on its recurring revenue and software businesses.

This change is expected to accelerate growth and steadily increase earnings and free cash flow. The newly formed company Precision Technologies will focus on key growth trends in technology, leveraging critical technologies in test and measurement, specialty sensors and aerospace and defense subsystems.

After the spin-off, Fortive will retain its Intelligent Operating Solutions and Advanced Healthcare Solutions segments, offering a portfolio with approximately 50% recurring revenue. The company plans to pursue a disciplined capital allocation strategy, focusing on mergers and acquisitions that drive recurring revenue, growth and free cash flow, while balancing acquisitions and share repurchases.

The Precision Technologies business, which will be known as NewCo after the spin-off, will continue to use the Fortive business system to drive growth and value. NewCo is set to take advantage of secular headwinds in its end markets and will target investments in organic growth, shareholder returns and selective M&A that align with its core strategy.

Along with the spin-off, Fortive announced a management succession plan. James A. Lico will retire as chairman, CEO and director upon completion of the spin-off. Olumide Soroye, currently president and CEO of Fortive’s Intelligent Operating Solutions segment, will take over as president and CEO of Fortive.

Tami Newcombe, who currently leads the Precision Technologies and Advanced Healthcare Solutions segments, will become president and CEO of NewCo. Additionally, CFO Chuck E. McLaughlin is set to retire by the end of the first quarter of 2025.

Fortive also disclosed its capital deployment strategy leading up to the completion of the spin-off, intending to use approximately 75% of its available cash flow for incremental share repurchases. The remaining funds will support quarterly dividends and debt reduction with the goal of maintaining strong, investment-grade balance sheets after the separation.

Finally, Fortive reaffirmed its outlook for the third quarter and full year 2024, with the expectation that its share buyback program will contribute to EPS growth in 2025.