Tyco shareholders have agreed a reverse one-for-four stock split ahead of the company’s planned break-up into three publicly traded companies.

The move will have the effect of reducing the number of common shares issued and outstanding at present from just over two billion to a little over 500,000.

In theory the market value of the new common shares would be four times higher, but there is no guarantee that would be the case.

The reason for the reverse split is to optimise the long-term value of Tyco common shares and bring the share price in line with the market prices and trading ranges for peer group manufacturing and industrial companies as it separates the company into three distinct and independent entities; Tyco International, Tyco Healthcare and Tyco Electronics.

Tyco plans to spin off its Tyco Electronics and Tyco Healthcare units into separate companies through tax-free dividends.

Tyco shares were trading at a fraction above $31 on the NYSE yesterday. A 1-for-4 reverse split carried out now would result in shareholders having one new common share in exchange for four old common shares. A new share would be valued at $124 based on a current price of $31, providing there was a four-times upgrade in value due to there being four-times fewer shares in the market place.

Tyco has advised shareholders that there is a risk involved in the reverse stock split as there can be no assurance that the market price of Tyco common shares will increase in proportion to the reduction in the number of common shares issued and outstanding before the reverse stock split.

The authority of the Board of Directors to implement a reverse stock split will expire if it has not been implemented by the end of September this year.

“While approval of this proposal is not required for Tyco to effect its planned separation into three independent, publicly traded companies, we do believe it is in the best interest of the company and the shareholders for the board to have this option available,” said Tyco chairman and chief executive Ed Breen.

Tyco shares are up about 2.1 percent so far this year, holding slight gains at a time when the Standard & Poor’s capital goods index is down 1.2 percent.