U.S. manufacturer ITT Corp. plans to split itself into three companies to take advantage of the growing water and industrial markets as its defense unit prepares for U.S. military spending cuts.
Its shares rose 18 percent Wednesday, reaching their highest point since the fall of 2008.
“We are theoretically at the beginning of a recovery in the commercial and industrial end markets, so the timing is good on that front,” said Robinson Humphrey analyst Peter Skibitski.
After the breakup, ITT Corp. will continue as an aerospace, transportation, energy and industrial engineering company. Another company will make water pumps, and the third will supply defense equipment.
Last month, ITT said 2011 growth in its businesses that supply water pumps and products for transportation markets would help its earnings.
It forecast that revenue and operating income would rise in those two segments, but fall in defense, the company’s largest unit, which accounts for more than 50 percent of sales.
Skibitski said uncertainty about ITT’s defense business because of expected U.S. budget cuts held back its share performance. With the share rise on Wednesday, ITT’s value is about $11.2 billion.
U.S. Defense Secretary Robert Gates said last week that he plans to cut $78 billion from the nation’s military budget over the next five years because of the government’s growing budget deficit.
“We believe that each of these future companies will be strategically well positioned for growth,” Chief Executive Steve Loranger said on a conference call.
Shareholders will own stock in all three companies, which likely will be traded on the New York Stock Exchange.
Chief Financial Officer Denise Ramos will be CEO of the new ITT, which will supply airplane parts and products for energy and other commercial markets.
David Melcher, head of the defense unit, will lead the new defense company. Gretchen McClain, president of the fluid technology business, will run the water business.
ITT shares, which gained 10 percent of their value in the last three months, were up $8.35, to $61.13, on the New York Stock Exchange.
