(Reuters) - Manufacturer Pentair Plc (>> Pentair PLC) said on Tuesday it would spin off its electrical business into a separate publicly traded company to focus on its core business of making water treatment equipment.

Pentair shares were up 3.3 percent on Tuesday afternoon at $68.26, a nearly two-year high.

The company, whose board of directors includes representation by activist hedge fund Trian Fund Management LP, has shed noncore businesses to improve performance.

"We have two businesses that have critical masses and are top-of-class in terms of profitability," Randall Hogan, Pentair's chairman and chief executive officer, said in an interview. "We looked at whether they would be viable independently, how their shares would trade, and this is the best way to drive shareholder value and give employees as much opportunity as possible."

The UK-based company last month sold its valves and controls business for $3.15 billion (£2.4 billion) in cash to U.S. factory automation equipment maker Emerson Electric Co (>> Emerson Electric Co.).

Pentair's electrical business, which makes stainless steel, aluminium and nonmetallic enclosures that guard sensitive electrical and electronic equipment, reported sales of $2.1 billion in 2016.

This business, to be separated in a tax-free spinoff to Pentair shareholders, will be named at a later date, Pentair said on Tuesday.

Pentair will be left with its water business, which reported sales of $2.8 billion in 2016.

The company's water treatment equipment is used in swimming pools and spas, aquaculture farms and laboratories, and the food and beverage industry.

The business also makes pumps and filtration systems used in flood control and the oil and gas industry.

Pentair expects one-time separation costs of about $100 million to $125 million related to the spinoff, which is estimated to close in the second quarter of 2018.

Pentair Chief Financial Officer John Stauch will become the company's chief executive after the spinoff, and Karl Frykman, president of Pentair's water unit, will become the company's chief operating officer.

Beth Wozniak, currently president of Pentair's electrical unit, will become CEO of the newly spun-off company. Hogan will retire and serve as chairman of the electrical business.

Goldman Sachs & Co LLC [GSGSC.UL] served as financial adviser to Pentair, while Foley & Lardner LLP acted as legal adviser.

(Reporting by Ankit Ajmera in Bengaluru and Greg Roumeliotis in New York; Editing by Martina D'Couto and Matthew Lewis)

Stocks treated in this article : Emerson Electric Co., Pentair PLC