Kidde Plc Business Information, Profile, and History

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History of Kidde Plc

Kidde plc, formed in 2000 by the demerger of Williams plc, is a leading global supplier of fire safety products and services, serving industrial, commercial, aerospace, combustion control, and retail customers. Operating over 50 business units in 20 countries, Kidde's product line includes smoke alarms, carbon monoxide detectors, portable fire extinguishers, breathing systems, industrial explosion protection systems, sprinkler systems, and emission monitoring systems. Kidde's major divisions include North American Fire Protection; European Fire Protection; Aerospace, Specialist, and Emerging Markets; and Residential and Commercial Fire Protection. Walter Kidde began his company in 1900 with only $300 in savings, a degree from Stevens Institute of Technology, and an interest in the construction industry. However, Kidde's business acumen helped push Kidde, Inc. into the ranks of Fortune 500 companies within the United States.

Expansion into the Fire Fighting Industry: Early 1990s

The New York construction company that Walter Kidde established in 1900 grew quickly into another area of interest. Kidde began to expand into the business of fire fighting, which became the catalyst for his company's rapid growth and development. In 1918, Kidde, Inc., then Walter Kidde & Company, purchased the rights to the "Rich" system for detecting fires on board ships. This method of extinguishing fires by steam had one major flaw, namely, steam caused extensive damage to the ship's cargo. Kidde's answer to this problem was to use carbon dioxide instead of steam as a means of smothering the fire without damaging the cargo.

While Kidde had made advances in solving the problems confronting effective fire fighting, he still faced another major hurdle. The carbon dioxide was not being released quickly enough from its container and therefore the extinguishing process was not completely successful. In 1923, Kidde solved this problem by purchasing the patent rights for a siphon device that allowed quick release of the carbon dioxide. With this new addition to the design of its extinguishers, Walter Kidde & Company achieved two manufacturing firsts: in 1924 the first portable carbon dioxide fire extinguisher was produced, and in 1925 the first built-in industrial system was installed. In addition, the company began winning government contracts. In 1926, Walter Kidde & Company along with the Navy, designed a system to protect airplane engines against fires.

With these new developments in the fire extinguisher aspect of the company, Kidde separated the fire-fighting business from the construction business but kept the original name. This was just the beginning of the multi-interest outlook that was later to become the trademark of Kidde, Inc into the 1980s.

The 1930s were profitable years for Walter Kidde & Company. By 1940, the company had 200 sales agencies in the United States and major cities in Europe, South America, Africa, and Asia. Subsidiary sales companies were also located in Canada, Germany, and Italy, and two factories were producing products in England.

Growth During World War II

In particular, World War II had a significant impact on the growth of the company. Prior to the war 30 percent of the company's extinguisher sales were to the U.S. government. In 1938, Walter Kidde & Company had its best year with sales of $2 million and a work force of 450. It was in this year that Walter Kidde wondered whether or not he was "smart enough to run a $5 million business," as he pondered the inevitable expansion of his company.

Five short years later, sales far exceeded the $5 million mark. By 1943, Walter Kidde & Company was producing $60 million worth of war equipment and the work force had increased to 5,000. The transition to war-time production was not an easy one; however, once the war began, production and demand for Kidde's products grew rapidly. So rapidly, in fact, that production of war equipment could not meet demand, and the company was often behind schedule. This was in part due to the company's need to adapt their peace time products to war uses.

Although production may have been slower than demand, the products manufactured by Walter Kidde & Company did play an important role in the war. In addition to the fire detection and extinguishing equipment for tanks, planes, and ships, Walter Kidde & Company also manufactured inflation devices for life rafts and safety belts. The company is credited with manufacturing the automatically inflated rubber life boats from which Captain Eddie Rickenbacker, a World War I hero and flying ace, and his seven companions were rescued after spending three weeks in the South Pacific when their airplane ran out of fuel.

Walter Kidde's concern over whether he was capable of running a $5 million business was clearly answered by 1943. The company was headed for a profitable future. While Walter Kidde may have been reticent about his potential as a businessman, his ability to discern future trends and developments assisted him in the growth of his own company. In 1939, he predicted the demand for labor-saving machinery, and the future of the "one-man-push-button-controlled plants" that would create individual working efficiency.

Kidde's ability in the private sector was enhanced by his involvement in the public sector. He was chairman of the board of trustees of Stevens Institute of Technology; a member of the New Jersey advisory board of the Public Works Administration; and president of the New Jersey Chamber of Commerce from 1935 to 1938. He also declined an offer to be the New Jersey Republican candidate for governor in 1927. His interest in making things work was underlined by his success in reorganizing the bankrupt New York, Susquehanna & Western Railroad, of which he was a trustee, and restoring it to a paying basis in 1937. In 1943, the year his company reached peak production figures, Kidde died at the age of 65 from a heart attack, and the company was handed over to his son, John Kidde.

As expected, the drop in production at the end of the war caused a dramatic drop in Walter Kidde & Company sales. In the 1950s the company diversified into areas of machinery and tool manufacturing, siphon devices for consumer and medical uses, and aircraft accessories. Fire extinguishers were still an important part of the company. However, in general, the activity of the company had markedly decreased. In 1959, sales reached the $40 million mark and did not change until 1964 when a new president was brought on board.

Changes Under New Management: 1964-1980s

In January 1964, there were several new changes at Kidde, changes that would affect the size and outlook of a company that had not experienced many since the war. Although Walter Kidde & Company was considered to be a firmly established company with an excellent reputation, it was also considered to be a company that needed direction.

Fred Sullivan, at that time an officer and director of the large conglomerate Litton Industries, was attracted to the idea of "defining" a new direction for the company. Sullivan was so interested in this new opportunity that he succeeded the late Robert L. Dickson, who had been president of the company since 1961.

Sullivan's rise to Kidde's top leadership is a classic story. He began by working as a $14-a-week clerk during the Depression at Monroe Calculating Machine Company, which was then the number one company of its kind. After 10 years at night school, Sullivan earned his BA degree at Rutgers, and a rare MBA at New York University. At the age of 39 he was president of Monroe. When Monroe merged with Litton Industries in 1958, Sullivan became an officer and director of the company until he left in 1964 to assume a new position at Walter Kidde & Company.

From the time Sullivan began his presidency at Kidde, acquisition and growth were elements of his primary strategy. His management style was described by Forbes magazine as "no-frills, tight-with-a-buck, keep it lean and liquid." This style meant reducing the work force by 10 percent and reorganizing the entire company upon his arrival at Kidde.

Sullivan's reorganization plans included the need to think in terms of customer markets instead of product lines. Prior to Sullivan's presidency, the company had separate lines for burglar alarms and fire protection services. One of the first initiatives of the company reorganization was to combine these two lines. This new definition of the protection field resulted in acquisitions of lock and safe companies by the close of the 1960s.

Under Sullivan's direction, Kidde quickly grew from a fire extinguisher concern of $40 million in annual revenues in 1964 to $400 million by 1968, when the company was incorporated as Kidde & Company. Inc. Some of the larger acquisitions of the 1960s included Dura Corporation, which manufactures auto parts and testing equipment; Lighting Corporation of America; and Grove Manufacturing Company, which manufactures hydraulic cranes. In particular, Grove became an important acquisition for Kidde because of its lucrative contracts with the U.S. government in the 1980s.

Kidde's fast rate of growth placed it in a unique position. While most large companies reach the Fortune 500 list after many years of development, Kidde just missed this notable ranking in 1965, a year after Sullivan's move into the company. Fortune magazine reported that Kidde was ranked 501 on the list that year and missed being 500 by $60,000, the price of one of Kidde's burglar-alarm systems for a large company. One year later, Kidde not only made it onto the list, but ranked 283.

One of Kidde's most problematic acquisitions was made in 1969 when it purchased U.S. Lines, a major but financially troubled transportation system. Sullivan was later to label this acquisition a "grave mistake." It was an acquisition that resulted in eight years of frustration and litigation. The U.S. Lines acquisition was, at the time, an attractive investment for Kidde because of its future earning potential as a container transportation system.

Although Kidde was apparently looking into the future when it made this acquisition, it did not seem to fit the Kidde formula of buying companies with a "proven record of successful growth faster than the GNP." Kidde competitors looked on in disbelief, feeling sure that Kidde had decided incorrectly. However, Sullivan looked past the operating losses of U.S. Lines and into the future of container transportation, which he believed represented a "major building block in a new kind of transportation system that is coming."

When U.S. Lines lost $1.5 million in 1970, Kidde began to look for a buyer. It was not until 1978 that a sale took place, and even though the shipping company had started to earn money again in the 1970s, Kidde was determined to sell it. The buyer was Malcolm McLean, who had founded Sea-Land Service. Inc., one of the U.S. Lines competitors. U.S. Lines was sold for $111 million, and the general analysis of the sale was that Kidde, and Sullivan, had managed to turn a potential disaster into a profit.

Kidde's sale of U.S. Lines was timely. With the emergence of the recession Kidde found itself in the enviable position of being in good in financial condition. This was also due to Kidde's decentralized approach and the careful acquisitions made in the late 1970s. Overall, Kidde purchased ten businesses in 1979, one of which included Victor Comptometer, which was right behind Sharp Electronics, the leader in sales of desktop calculators.

By 1980, the company had adopted Kidde, Inc. as its title and was making solid profits in its recreational and consumer lines, such as Farberware cookery, Jacuzzi water therapy equipment, Bear archery equipment, and Sargent locks. Sullivan was not concerned that the company was too diversified. He believed that his decentralized approach to managing the Kidde subsidiaries helped to keep the subsidiaries "responsible and profitable." The group managers were considered to be corporate-level executives who had offices at the leading corporation within their group, and not at the New Jersey headquarters. This management style allowed Sullivan to maintain control of the subsidiaries, but it also allowed for decision-making at the local level.

While consumer and recreational products were doing well for the company, Kidde made a move away from this market in 1981 into the energy and industrial markets. Kidde's Grove Manufacturing purchased Oilfield Industrial Lines Inc. that same year and began its oil rig business. Although Kidde was affected when the price of oil dropped in 1982, the company promptly moved into oil and gas exploration as a way in which to establish a market for its own rigs. However, the plan failed, and the blame was placed on the explorers, who were considered to be novices. This failed expansion into oil and gas exploration resulted in the sale of five operating units to compensate for the 1985 losses of $400 million.

While Kidde's entrance into the oil industry was not successful, and its future financial stability was questioned because of such a major loss, the 80 new businesses that had been acquired by the company since Sullivan joined the firm in 1964 had established Kidde as a solid, diversified conglomerate. Even though new developments for Kidde Inc. depended on its ability to recover from the oil and gas exploration setback, management pledged to continue its diversification and growth strategy.

Kidde Falls Under New Ownership: 1987-88

In July 1987, however, Sullivan announced that Kidde was studying options such as reorganization or selling off some or all its assets. Sure enough, in August of that year, Hanson Industries, the U.S. arm of Hanson Trust of the United Kingdom, bought Kidde in a $1.7 billion deal. Sir Gordon White, the chairman of Hanson Industries, commented on the good match of the two groups' operations and said that Kidde would be kept largely intact. Some of Hanson's previous takeovers, however, were paid for in part by disposing of unwanted assets, leaving Kidde's future uncertain.

Hanson's ownership of the diversified conglomerate--at the time of the deal Kidde had over 100 subsidiaries--was short lived. In January 1988, Hanson sold the first of its Kidde holdings, the Computrol manufacturing unit, for $2.2 million. Hanson continued to restructure Kidde operations, selling off bits and pieces of the once highly-diversified group. In August 1988, the firm sold most of the Kidde fire protection business to Pilgrim House Group, a U.K.-based firm involved in electrical products and fire protection. Included in the deal was the Walter Kidde North America Group, Fenwal Inc., and Kidde's Fire Protection Group Europe. Pilgrim House, however, was purchased by Williams Holdings plc, an industrial management firm, during the Kidde acquisition process, leaving Williams ownership of Kidde.

Left with one of its original business focuses, Kidde emerged in the 1990s as a leading fire protection firm. Williams attributed much of its success to its acquisition of both Pilgrim and Kidde, which turned the UK-based conglomerate into global competitor in the aircraft fire detection and suppression equipment industries.

In 1990, subsidiary Walter Kidde Aerospace Inc. opened a Production and Technology Center, spending $4 million to expand its operations to accommodate increasing demand for aircraft, vehicle, and marine fire protection systems. By that time, Kidde products were found in aircraft such as the B-2 Stealth Bomber and 747-700 airliners.

While Kidde experienced renewed growth under new ownership, it did battle with negative publicity during 1992. Sullivan, the former CEO of Kidde, was named in an insider trading scandal that involved Kidde securities. The charges, which claimed that seven men from various companies earned $13 million from 1987 to 1989 on insider trading tips, cast a dark shadow on the Kidde name. Nevertheless, Kidde's parent company continued to focus on its fire protection business.

By 1996, in fact, Williams had sold off many of its interests to relieve its debt load, enabling it to focus on its security and fire-related businesses. The following year, as part of its new direction, Williams purchased Chubb Security plc. The firm continued to divest home improvement subsidiaries, while relying on both Kidde's and Chubb's core businesses to boost its lagging profits.

The profit bolstering plan never reached fruition and in 1998, Williams began merger talks with competitor Tyco International Ltd. Negotiations between the two collapsed that year and again in 1999 after failed attempts to reach an agreement on price.

When profits dropped by 49 percent in 1999, Williams set plans in motion to break up. Like many U.K.-based conglomerates that experienced great success during the 1980s, Williams unraveled during the late 1990s, joining the likes of other failed companies, including Kidde's former owner Hanson as well as BTR and Wassall.

Independent in the New Millennium

On March 7, 2000, Williams officially announced its breakup, leaving Chubb plc and Kidde to operate independently. The firm adopted the name Kidde plc in September 2000, and listed on the London Stock Exchange in November of that year.

Operating on its own for the first time since the 1980s, Kidde focused on its main business of supplying fire and safety products, systems, and services. Without the weight of its parent company, Kidde appeared to be back on track in its first year of independent operation. Its aerospace and industrial fire protection segments reported strong growth in 2000 and management remained optimistic about future growth. CEO Michael Harper stated in a 2001 AFX European Focus article that although the firm was concerned with the growth of the U.S. economy, Kidde's "growing strengths in Europe and South America and the influence of regulation in all our markets give us confidence for the year ahead."

Principal Subsidiaries: AB Svenska Tempus (Sweden); Angus Fire Armour Ltd.; Autronica Fire and Security AS (Norway); Chubb Parsi SA (Spain); Detector Electronics Corp. (U.S.); Eau et Feu (France); Fireye Inc. (U.S.); Forney Corp. (U.S.); FSI Mexicana SA de CV; Fyrnetics (Hong Kong) Ltd.; Guardall SrL (Italy); Guardall Ltd. (Scotland); Heien-Larssen A/S (Norway); Incom Explosionsschutz AG (Switzerland); Industrial de Fosfatos SA de CV (Mexico); Kidde Argentina SA; Kidde-Deugra Brandschutzsysteme GmbH (Germany); Kidde-Fenwal Inc. (U.S.); Kidde Fire Protection Ltd.; Kidde Granviner Ltd.; Kidde Technologies Inc. (U.S.); L'Hotellier (France); National Foam Inc. (U.S.); Noha Norway A/S; Pyrene Corp. (Canada); Resmat Parsch Sistemas Contra Incendio Ltda (Brazil); Samtekno OY (Finland); Sai SpA (Italy); Silvani Antincendi SpA (Italy); Societe Industrielle pour le Development de la Securite (France); Kidde Polska SpZoo (Poland); Walter Kidde Portable Equipment Inc. (U.S.); Williams Fairey Engineering Ltd.; Yanes Minas Industria E Commercio Ltda (Brazil).

Principal Divisions: Aerospace, Specialist, and Emerging Markets; Residential and Commercial; North America Fire Protection; European Fire Protection.

Principal Competitors: Européenne d'Extincteurs SA; McWane Corp.; Tyco International Ltd.

Chronology

• Key Dates:
• 1900: Walter Kidde establishes a construction company.
• 1918: Walter Kidde & Co. purchases the rights to a system that detects fires aboard ships.
• 1926: The firm and the U.S. Navy develop a system to protect airplane engines against fires.
• 1938: The company's sales reach $2 million.
• 1943: Walter Kidde dies, and his son John takes over the company.
• 1964: Fred Sullivan becomes president of the firm.
• 1968: Company incorporates as Kidde & Company, Inc.
• 1969: Kidde acquires U.S. Lines.
• 1980: The firm officially adopts the name Kidde, Inc.
• 1981: The company moves into the energy industry with the purchase of Oilfield Industries Lines Inc.
• 1985: Five operating units are sold to compensate for $400 million in losses.
• 1987: Hanson Industries buys Kidde for $1.7 billion.
• 1988: Williams Holdings plc purchases Kidde's fire protection business from Hanson.
• 1990: Subsidiary Walter Kidde Aerospace Inc. expands, creating a Production and Technology Center.
• 1992: Sullivan is named in an insider trading scandal involving Kidde securities.
• 1999: Tyco International makes a bid for Williams.
• 2000: Williams demerges, and Kidde plc is formed and trades independently on the London Stock Exchange.
• 2001: Kidde acquires Fire Protection Services Ltd.