Fortive (FTV) Plans for Separation Into Two Independent Public Companies

Fortive Corporation (“Fortive”) (NYSE: FTV) today announced its intention to pursue a tax-free spin-off of its Precision Technologies segment (“NewCo”). The planned spin-off will create two independent publicly traded companies, each with focused business models and tailored investment and capital allocation strategies.

James A. Lico, Fortive’s President and Chief Executive Officer, stated, “Over the last eight years, we’ve created a more durable, higher-growth company with an intense commitment to innovation. Our unique culture rooted in our powerful Fortive Business System (FBS) has been critical to the value we’ve driven over this period. Today’s announcement marks the next step forward in Fortive’s evolution. Once the spin-off is complete, Fortive will be more focused on recurring revenue and software businesses, and better positioned to accelerate growth and consistently grow earnings and free cash flow. Similarly, our Precision Technologies business will thrive as a standalone public company, focused on key secular growth trends powering the world’s technology advancements. We are confident that this plan will best position each company for the future and deliver enhanced value for all stakeholders.”

Fortive: Focused and Resilient Portfolio with ~50% Recurring Revenue

Upon completion of the planned spin-off, Fortive will consist of the portfolio brands currently operating under Fortive’s Intelligent Operating Solutions and Advanced Healthcare Solutions business segments. Fortive's market-leading portfolio of technology solutions, with approximately 50% recurring revenue, delivers productivity, safety and reliability value to customers. The company expects to pursue a disciplined and balanced capital allocation strategy, prioritizing M&A that enhances recurring revenue, growth and free cash flow, while remaining balanced between acquisitions and share repurchases.

NewCo: Precision Technologies Businesses Powering the Digital and Electric Future

Following the expected completion of the spin-off, NewCo will comprise the same leading brands currently operating under the Precision Technologies segment and will continue to benefit from FBS’s ability to drive growth, innovation and value. NewCo will also be poised to capitalize on powerful secular tailwinds across key end markets by leveraging its mission critical technologies in test and measurement, specialty sensors, and aerospace and defense subsystems. With industry-leading margins and cash flow generation, NewCo will be well-positioned to pursue organic growth investments, return cash to shareholders, and seek selective M&A opportunities aligned to its core strategy and value creation levers.

Initiation of Fortive Leadership Succession Plan

At the completion of the spin-off, James A. Lico will retire as President and CEO and as a director. Upon Mr. Lico’s retirement, Olumide Soroye, current President and CEO of Fortive’s Intelligent Operation Solutions segment, will be appointed as President, CEO, and a director of Fortive. Tami Newcombe, current President and CEO of Fortive’s Precision Technologies and Advanced Healthcare Solutions business segments, will assume the role of President and CEO of NewCo in connection with the separation. Fortive also announced that Chuck E. McLaughlin will retire as CFO by the end of the first quarter of 2025.

Mr. Lico said, “I couldn’t be prouder of what our team has accomplished since Fortive’s launch in 2016. We are driving meaningful progress in the world and delivering differentiated results, backed by our proven Fortive Business System. We have intentionally evolved our FBS toolset to foster innovation, delivering growth and unique value for our customers. I am excited for the opportunities ahead for Fortive and the Precision Technologies segment as two focused, independent public companies under the leadership of Olumide and Tami. Their impactful contributions and dedication have set both companies on a path to success, which gives me great confidence in their future.”

Alan G. Spoon, Chairman of Fortive’s Board, noted, “Over the last eight years Jim has relentlessly strived to make Fortive better every day and will continue to do so through this transition. Olumide and Tami have driven impressive results for Fortive, developing market leading innovation and driving profitable growth. We are looking forward to their continued success as they expand their leadership responsibilities in the future.”

Commitment to Value-Enhancing Capital Deployment

Between now and the completion of the spin-off transaction, Fortive expects to utilize approximately 75% of its available free cash flow to fund incremental share repurchases. The remainder of free cash flow is expected to fund Fortive’s quarterly dividend payments and reduce debt obligations, continuing two strong, investment grade balance sheets upon separation.

Mr. Lico said, “We believe this is the right portfolio evolution for Fortive, and we see proactively repurchasing our shares as the most disciplined and highest value-enhancing deployment of capital as we work to execute the spin.”

Reaffirming Q3 2024 and Full-Year 2024 Outlook

In connection with today’s announcement, Fortive reaffirmed its Q3 2024 and full-year 2024 outlook and expects that its share repurchase program will enhance its EPS growth in 2025.

Separation Details

The spin-off is expected to be effected through a pro-rata distribution to Fortive shareholders of common stock of a newly-formed entity holding certain assets and liabilities comprising the Precision Technologies business. The transaction is intended to qualify as a tax-free spin-off to Fortive shareholders for U.S. federal income tax purposes.

Fortive is currently targeting completion of the spin-off in the fourth quarter of 2025, subject to the satisfaction of certain conditions including, among others, final approval of Fortive’s Board of Directors, satisfactory completion of financing, receipt of a favorable opinion of legal counsel and/or a private letter ruling from the U.S. Internal Revenue Service with respect to the tax treatment of the transaction for U.S. federal income tax purposes, the effectiveness of a Form 10 registration statement filed with the U.S. Securities and Exchange Commission, and other regulatory approvals.

Conference Call Details

Fortive will discuss this announcement on a conference call Thursday, September 5th, starting at 8:00 a.m. ET. The call and an accompanying slide presentation will be webcast on the “Investors” section of Fortive’s website, www.fortive.com, under “News & Events”. A replay of the webcast will be available at the same location shortly after the conclusion of the presentation.

The conference call can be accessed by dialing 877-407-3110 within the U.S. or by dialing 215-268-9915 outside the U.S. a few minutes before 8:00 a.m. ET and notifying the operator that you are dialing in for Fortive’s conference call. A digital recording of the conference call will be available two hours after the completion of the call until Thursday, September 19, 2024. You can access the conference call replay on the “Investors” section of Fortive’s website, www.fortive.com, under “News & Events,” or by dialing 877-660-6853 within the U.S. or 201-612-7415 outside the U.S (Access ID: 13748712).

Advisors

Evercore and Morgan Stanley & Co. LLC are serving as financial advisors, and Wachtell, Lipton, Rosen & Katz is serving as legal counsel to Fortive.

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