Gabelli Comments On ITT Plans to Seperate Business Into Three Publicly Traded Companies

In a report published by Gabelli, ITT Corporation ITT in January 2011, ITT announced plans to separate the company's businesses into three distinct, publicly traded companies.

Gabelli said that under the plan, ITT would execute tax-free spinoffs to shareholders of its water-related businesses (Future Water) and its existing Defense & Information Solutions segment (Future Defense). Following the spin-off, ITT would continue to operate as an industrial company (Future ITT). “As of December 31, 2010, ITT had $1,032 mm of cash and $1,365 mm of debt. Mgmt has not indicated how the assets and liabilities will be allocated except that all three companies will be starting with attractive balance sheets. Based on an 11x EBITDA multiple, we calculate Future Water's PMV to be $36 in 2011. Using an 8x EBITDA multiple, Future Defense's private market is about $37. And using an 8x EBITDA multiple, Future ITT's private market value is about $15 per share. Combined PMV of $88.”

ITT Corporation closed yesterday at $56.53.