Tyco International Ltd.?s board yesterday voted to split into three companies, dismantling the conglomerate built by jailed former Chief Executive Officer Dennis Kozlowski, according to a person familiar with the decision.

Tyco?s health-care and electronics units will be spun off to investors and current CEO Edward Breen will stay on to run the remaining businesses which include fire and security, the person said following a board meeting in Bermuda, where the company is based. Tyco spokeswoman Sheri Woodruff declined to comment.

The health-care and electronics units will remain in Bermuda, the person said.

Breen spent more than three years reducing debt and selling businesses as Tyco sought to recover from a corporate fraud scandal. He cut earnings forecasts twice in 2005 after promising to deliver growth, fuelling investor impatience.

The shares dropped 23 percent last year until November when Breen said he was considering a split. The spinoffs will take at least 12 months to complete, the person said.

?This was a company that never really got the benefits of being a conglomerate,? said Steve Hoedt, an analyst with National City Corp. in Cleveland, which owns 2.2 million Tyco shares.

?The value creation is going to be seen in what businesses Tyco keeps: the industrial businesses, engineered products and fire and security, because that?s where the management team has the potential to reduce costs.?

Tom Lynch will run the electronics business, while Rich Meelia will head healthcare. Juergen Gromer, who currently runs electronics, will stay on as No. 2 at the unit, the person said.

Shares of Tyco, run from West Windsor, New Jersey, fell 3 cents to $30.31 in New York Stock Exchange composite trading. They have climbed 11 percent since Breen said Tyco was considering a breakup on November 16.

Tyco?s six percent notes due in 2013 strengthened after the report of the vote by as much as nine basis points to comparable government debt.

The bond traded at 103 cents on the dollar, up 0.6 of a cent, as the yield fell about ten basis points to 5.5 percent.

?What we need to know now is if the holding company debt is going to the spin-offs or sticking with the surviving entity?? said Leon Burger, an analyst at Principal Global Investors which holds $86 million in Tyco bonds.

?Is this going to be an investment-grade company when the smoke clears? Shareholder litigation is also an outstanding concern. Until we get that information it could be volatile and uncertain for their bonds.?

The capital structure of each new company will aim to have investment-grade ratings from Moody?s Investors Service and Standard & Poors, the person said. Liability from potential settlement of shareholder suits would be spread across the three businesses, the person said. No initial public offerings are planned.

Tyco?s board believes the units will be better able to use capital and grow as stand-alone companies in the next three to five years, rather than have to remain a certain size within Tyco?s portfolio of businesses, according to the person. Healthcare, for instance, will be able to control its own research and development budget.

Tyco Healthcare is the world?s second-biggest maker of disposable medical supplies behind Johnson & Johnson with about $9.5 billion in sales. The electronics business, the largest maker of connectors used by automobile makers, accounted for about $12 billion of Tyco?s $39.7 billion in revenue for the fiscal year ended in September.

?There are only two or three of the top ten conglomerates that are making money,? Jerome York, a Tyco board member since November, 2002, said in a January 10 interview in Detroit. ?A conglomerate has to bring more than the sum of its parts, or it?s just a holding company.?

Tyco joins Viacom Inc., Cendant Corp. and Primedia Inc. as companies that in the past year abandoned a strategy of aggregating disparate businesses.

?Most people are of the view that this is long overdue,? said Frank Aquila, a mergers partner at New York-based Sullivan & Cromwell LLP, the top legal adviser on transactions last year. ?It probably would have happened a few years ago had there not been the criminal and accounting issues around Tyco.?

Kozlowski, 59, attempted to break up the company in 2002 under a proposal drafted by Goldman, Sachs & Co., a plan later withdrawn amid scepticism among investors about Tyco?s accounting and management. He built Tyco through $60 billion in acquisitions over more than a decade, before being convicted of looting the company and deceiving its shareholders.

?We?re looking at a target price on this of $30 and that?s right in the neighbourhood of where it?s at now,? National City?s Hoedt said in an interview yesterday.

?It?s possible that you could get a little more upside from it, but if you look at the businesses on a cash-flow valuation basis, a breakup wouldn?t create that much more value than what we?ve seen.?

Tyco?s three percent ?organic? revenue growth rate, or increase in sales from businesses already owned in the past year, is short of management?s goal of six percent.

Banc of America Securities analysts who follow Tyco bonds, including Doug Karson, assigned a ?neutral? rating to the company?s debt.

?The capital structure of the residual Tyco, after the spinoff of electronics and health care, could be weaker depending on how much debt is left in the residual entity,? Karson wrote in a note to investors.

Breen, 49, slashed the company?s net debt by more than half to $9.3 billion as of September.