Johnson Controls Merging With Tyco in Inversion Deal

Manufacturing giants Tyco International and Johnson Controls are planning to merge in what is being called another tax inversion deal that will create an industrial conglomerate with annual revenue of more than $32 billion.

The deal is the latest corporate tax inversion in which a company based in the U.S. acquires a foreign business and then switches headquarters to the home of the foreign company due to it paying lower corporate taxes.

Johnson Controls based in Milwaukee will shift it global as well as legal headquarters to those of Tyco in Cork Ireland, but will house a primary operation in Milwaukee.

The combined new company hopes to link complementary businesses together including air-conditioning and heating systems, security technology and fire protection toward a new world that has come to be defined by connected, smart products called the Internet of Things.

Technology is now converging said CEO of Johnson Controls Alex Molinaroli during a conference call. That is what the opportunity is that has come along.

Shareholders at Johnson Controls will own just over 56% of the new business, which will be called Johnson Controls plc and will receive cash in the amount of $3.9 billion, while Tyco shareholders will have 44% ownership.

Johnson Controls is planning to press forward with its plans previously announced to spin off the remaining automotive interiors and seating business into a standalone company named Adient at the start of its fiscal year 2017.

The two companies are expecting to shed costs of $500 million during the upcoming three years following the closing of the deal. They expect to save in taxes over $150 million annually through this inversion.

Johnson Control, also known as JCI to many from the industry, has been cutting back its operations of recent, selling off its global workforce solution segment and its automotive electronics company.

JCI has identified building products and batteries, as its primary businesses.

Tyco separated into three businesses during 2012. It is now focusing on security and fire protection products including the installation, service and monitoring of the same.

 

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