(Bloomberg) -- Fortive Corp., the $25 billion conglomerate, plans to spin off its industrial test and measurement business to concentrate on software and health care.
The company announced on Wednesday that it’s separating the gauging unit into a publicly traded company. The remaining business will comprise Fortive’s industrial software and health-care operations.
Fortive Chief Executive Officer Jim Lico, 58, will step down upon completion of the breakup, which is expected to occur in the fourth quarter of 2025. Olumide Soroye, who currently leads Fortive’s intelligent operations division, will then take over as CEO. Tami Newcombe, who currently oversees the precision technologies and advanced health-care units, will lead the test and measurement spinoff, Fortive said.
Shares of the Everett, Washington-based company jumped as much as 6% in late trading Wednesday in New York before paring gains to rise 3.7% at 4:56 p.m.
Fortive itself is a spinoff: The company separated from Danaher Corp. in 2016 as a hodgepodge of industrial assets. Fortive has underperformed Danaher in the wake of that breakup, as well as broader benchmarks. The stock had fallen 2.6% so far this year through Wednesday’s close, trailing the 16% gain for the S&P 500.
“The value inherent in what we’ve built at Fortive has not been reflected in the share price,” Lico said in an interview. “These businesses increasingly look different.”
The industrial monitoring and measurement arm is subject to swings in the economy and fluctuating investment priorities. That volatility can make it harder for investors to appreciate the stability of revenues generated by the software and health-care operations, Lico said.
“What we’ve found in the industrial world is that clarity of strategy is really important,” he said.
Fortive previously spun off the Vontier Corp. transportation and mobility businesses in 2020 and divested an automation and specialty products platform. It’s also spent almost $10 billion on acquisitions of health care and software assets as part of a pivot to higher-growth and less volatile businesses.
Many of those deals — including the $2.7 billion takeover of Johnson & Johnson’s advanced sterilization products operations in 2019 and the $2 billion purchase of facilities management software provider Accruent in 2018 — will form the basis of the remaining Fortive business after the breakup.
Fortive intends to prioritize share repurchases in the period prior to the spinoff, with the company earmarking three quarters of its free cash flow for buybacks, it said.
Lico added that he’s not interested in being the CEO of another public company after he steps down.
“I’ve got lots of things I want to do but quite frankly, being a public company CEO for what will be over nine years, these are tough jobs,” he said. “I look forward to maybe downshifting a little bit.”
(Updates with details throughout.)
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