“Johnson Controls has been seeking to focus on energy storage and building systems such as air conditioning, where Tyco’s fire protection expertise will complement its building solutions division”, the FT said.
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The merger will combine Johnson Controls’ commercial buildings business with Tyco’s fire security offerings, accelerating Johnson Controls’ transformation following its decision to spin off its automotive parts unit.
Johnson Controls is based in Milwaukee but its legal and global headquarters will relocate to Cork, Ireland where Tyco International is based. It also marks the latest occurrence of a corporate inversion, in which a U.S.-based company acquires a foreign firm and switches its headquarters to the foreign firm’s home to lower its tax bill. Johnson Controls shareholders may choose one share of the combined company or $34.88 a share in cash.
The former secretary of state, who is leading the national polls to be the Democratic presidential nominee in November’s election, last month criticised as “offensive” the tax-driven merger of USA drug company Pfizer with Dublin-based Allergan in another inversion deal.
“The technical key is the cash which allows Johnson shareholders to fall below the 60 percent threshold”, Willens said about the $3.9 billion Tyco will pay to Johnson Controls shareholders. Now based in Ireland, Tyco operates in Princeton, New Jersey.
Shares of Johnson Controls have lost more than a quarter of their value since the start of 2015, while Tyco’s shares have fallen by over 30pc.
Johnson Controls’s shareholders will own 56% of the merged company.
The companies project at least $650 million in savings, which the companies said would be achieved over three years, including $150 million in annual tax savings. Afterward, Oliver will become CEO and Molinaroli will become executive chair. The companies expect that shares of the combined company will be listed on the New York Stock Exchange and trade under the “JCI” ticker.
The US corporate income tax rate, 35%, is the highest in the developed world, and certain corporate tax laws mean an independent US company could end up paying more taxes than an identical US company owned by a foreign parent.
In other Johnson Controls news, VP Brian J. Cadwallader sold 28,628 shares of Johnson Controls stock in a transaction dated Friday, October 30th.
As of the close of trading on 22 January, Tyco International sported a market capitalisation of $12.98bn. Johnson Controls has regularly increased its dividend for decades, while Tyco’s payout has fluctuated over the past 10 years.
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Wachtell and A&L Goodbody advised Johnson Controls, while Centerview Partners served as lead financial adviser, with Barclays also advising.
