Itt Splitting Into Three Parts Proposed Breakup Would Give Managers Additional Flexibility

The one-time quintessential conglomerate ITT Corp. will divide itself into three parts in one of the biggest corporate restructurings ever after flirting with the idea for more than two years.

ITT said Tuesday its board approved management’s plan to split its $25 billion business empire into three independent companies - insurance, industrial products and hotels-entertainment.

Shareholders, who would get a share in each new company for each ITT share they own, will vote on the plan this fall. But the early reaction on Wall Street was positive.

ITT rose $6.25 a share to close at $115.50 on the New York Stock Exchange.

The company said the breakup would give its managers more flexibility is running their businesses and getting access to capital while creating higher share value for stock owners.

Consumers probably won’t see much impact from the breakup in dealing with their Hartford insurance agent, checking in at a Sheraton hotel or placing a bet at Caesars World casinos. Those names along with Madison Square Garden and the New York Knicks and Rangers sports teams are ITT’s best-known brands.

But analysts said the breakup may mean investors will examine the individual companies more closely than they have the current business divisions and may discover values unreflected in ITT’s stock price.

“That kind of examination usually bodes well for the stock,” said Jack Kelly, who follows ITT for Goldman Sachs & Co.

Phua Young, analyst for the investment firm Lehman Brothers, estimated the three companies are worth a combined total of $125 to $140 a share. He says the entertainment and insurance businesses are currently undervalued.

ITT has acknowledged for more than a year that it was considering a division of the company, which got its start in the phone business in the Caribbean in 1920. It became the quintessential conglomerate via more than 250 acquisitions in the 1960s and 1970s.