Fortive Corp Plans Tax-Free Spin-Off of Precision Technologies Segment

Fortive Corp (NYSE:FTV) announced plans for a tax-free spin-off of its Precision Technologies segment, creating two independent publicly traded companies. This strategic initiative aims to foster focused business models and distinct investment strategies.

James A. Lico, President and CEO of Fortive, noted significant growth and innovation over the past eight years, stating that the spin-off will allow Fortive to emphasize recurring revenue and software operations.

This transition is anticipated to boost growth while enhancing earnings and free cash flow. The new Precision Technologies company will target key technology growth trends, benefiting from 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, maintaining a portfolio with about 50% recurring revenue. The company will implement a disciplined capital allocation strategy concentrating on mergers and acquisitions that enhance recurring revenue and growth, alongside balancing acquisitions with share repurchases.

Following the spin-off, the Precision Technologies business, rebranded as NewCo, will utilize the Fortive Business System for growth and value creation. NewCo plans to leverage market trends, focusing on organic growth, shareholder returns, and selective mergers that align with its core strategy.

Additionally, Fortive set forth a leadership succession plan coinciding with the spin-off. James A. Lico will retire from his roles as President, CEO, and director upon completion. Olumide Soroye, currently President and CEO of Fortive’s Intelligent Operation Solutions, is designated to be the new President and CEO of Fortive.

Tami Newcombe, presently leading Precision Technologies and Advanced Healthcare Solutions, will assume the role of President and CEO of NewCo. CFO Chuck E. McLaughlin is expected to retire by the end of Q1 2025.

Fortive also announced its capital deployment strategy ahead of the spin-off, intending to allocate approximately 75% of its free cash flow for share repurchases, while the remaining will support quarterly dividends and debt reduction, ensuring a strong investment-grade balance sheet post-separation.

Lastly, Fortive reaffirmed its third-quarter and full-year 2024 outlook, forecasting that the share repurchase program will positively influence EPS growth in 2025.