Shareholders of both Glendale-based Johnson Controls Inc. and Cork, Ireland-based Tyco International PLC today approved the $16 billion merger of the companies, clearing the path to the completion of the deal Sept. 2.
Johnson Controls makes automotive batteries and seating components, as well as building energy efficiency systems. Its shareholders voted in Dallas at 1 p.m. They voted 97 precent in favor of the transaction, with 81 percent of outstanding shares represented.
Shareholders in Tyco, which makes fire and safety products, voted at 3 a.m. Milwaukee time in Dublin. The breakdown of that vote was not given.
Two-thirds of outstanding shares of JCI stock were required to vote in favor of the merger to represent an approval. JCI shareholders also conducted an advisory vote on executives’ compensation related to the merger, which did not pass.
“I am pleased our shareholders have voted in favor of this powerful strategic combination, which will unite two world-class companies with complementary capabilities,” said Alex Molinaroli, chairman and chief executive officer of Johnson Controls. “I am excited and enthusiastic as we create the world leader in buildings and energy systems with a strong leadership team and dedicated employees around the world ready to deliver on the promise of smarter cities and communities.”
“We are excited about combining the vast capabilities of Johnson Controls and Tyco to help customers improve their safety, performance and operations,” said Tyco CEO George Oliver. “I would also like to thank our shareholders for their confidence and investment in the company over the years and for their support of our vision with their approval of this merger.”
The companies will be combined under Tyco International plc, and the new company will be called Johnson Controls plc. Johnson Controls shareholders will own 56 percent of the equity of the combined firm, for aggregate cash consideration of about $3.9 billion. The total transaction price was not disclosed, but a Reuters report pegged it at $16.5 billion.
Immediately prior to the merger, Tyco will effect a reverse stock split and its shareholders will receive a fixed exchange ratio of 0.9550 shares for each of their existing Tyco shares, which is at a 13 percent premium on 30-day volume-weighted average prices. The transaction will be tax-free to Tyco shareholders.
Johnson Controls shareholders will have one of two options: exchange each Johnson Controls Inc. share for a Johnson Controls plc share; or receive $34.88 per share of Johnson Controls Inc. stock. This transaction will be taxable to Johnson Controls shareholders.
JCI and Tyco expect to achieve $1 billion in savings as a result of the merger. JCI also is establishing its headquarters in Ireland as part of the merger in a tax saving move known as an inversion. The North American operational headquarters will be in the Milwaukee area.
After the merger, JCI will spin off its automotive seating business into a new company, Adient Ltd., also to be based in Ireland.
The companies have faced criticism and pushback on the planned combination, which would allow it to avoid paying $150 million in U.S. taxes each year, while retaining its North American operational headquarters in the U.S. The combined firm will have $32 billion in annual revenue.
Johnson Controls and Tyco expect the merger to allow them to accelerate growth and innovation. In March, they named the integration team and in May, they named the leadership team for the combined firm.
Tyco will move some of its operations to Milwaukee when the firms integrate, but Johnson Controls has not revealed its overall plan for Milwaukee operations moving forward. Johnson Controls has about 3,400 employees in Milwaukee and 130,000 globally.
Last week, the firms settled a lawsuit attempting to block the merger.
