PNR Pentair Inc

By Bob Tita 

Tyco International PLC said it has reached a tentative settlement to a dispute with the U.S. Internal Revenue Service that would require Tyco and two businesses it spun off in 2007 to pay up to $525 million for claims of back taxes.

The settlement, disclosed Tuesday in a regulatory filing, is far less than the $1 billion to $1.3 billion in taxes and penalties projected by some analysts. Tyco, TE Connectivity Ltd. and Covidien PLC, which was acquired last year by Medtronic PLC, would pay the IRS between $475 million and $525 million.

Tyco, which is based in Ireland and makes fire suppression and security equipment for commercial buildings, would pay 27% of the settlement amount, or roughly $128 million to $142 million. TE Connectivity, which manufacturers electronic components, and Medtronic PLC, a supplier of medical devices, would be responsible for 31% and 42% of the settlement respectively.

Tyco spun off TE Connectivity and Covidien as stand-alone public companies as part of decadelong dismantling of Tyco's business portfolio. The industrial conglomerate also spun off home security service ADT Corp. and sold its industrial pipes and valves business in 2012 to Pentair PLC. Tyco said neither ADT nor Pentair would be liable for a share of the settlement under an earlier agreement between Tyco and the IRS.

The settlement is subject to the approval of the IRS Appeals Division and the U.S. Tax Court. Tyco's portion of the settlement would be covered by the $215 million that the company has already set aside for the case. Tyco said it expects to pay its share of the settlement in the next six months.

The IRS accused Tyco in 2013 of owing as much as $2.8 billion stemming from deductions of interest payments from Tyco's U.S. income taxes for loans between its foreign-based businesses from 1997 to 2000. The settlement also would apply to similar pending IRS claims for 2001 through 2007, Tyco said.

"This is a favorable deal," said Nicholas Heymann, an analyst for William Blair & Co. "It reduces the uncertainty of getting this done."

Write to Bob Tita at robert.tita@wsj.com

(END) Dow Jones Newswires

January 19, 2016 14:02 ET (19:02 GMT)

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