Glendale-based Johnson Controls Inc. is warning the holders of its common stock to reject an unsolicited “mini-tender” offer from Toronto-based TRC Capital, which is attempting to purchase up to 4 million of the company’s shares.
TRC Capital, a private equity firm, is offering to purchase up to 0.58 percent of the Johnson Controls stock shares at $25.60 per share, which is about $1.33, 4.94 percent, below the company’s share price of $26.93 on Aug. 27, the date prior to the offer.
Johnson Controls’ stock is normally traded on the New York Stock Exchange with the “JCI” ticker symbol.
“Johnson Controls recommends that stockholders not tender their shares in response to TRC Capital’s unsolicited mini-tender offer. Johnson Controls is not associated in any way with TRC Capital, its mini-tender offer or the offer documentation,” Johnson Controls stated in an advisory to shareholders. “The TRC Capital offer is at a price below the current market price of Johnson Controls common stock, and TRC Capital’s obligation to purchase shares tendered is subject to a number of conditions, including the ability of TRC to obtain sufficient financing on terms satisfactory to TRC.”
TRC Capital is infamous for the practice of making unsolicited offers for stock shares below the market price. In recent months, TRC Capital has made unsolicited mini-tender officers for a stable of high-profile stocks, including Detroit-based Ford Motor Co., Houston-based Waste Management Inc., Houston-based Phillips 66 and Cleveland-based Sherwin-Williams Co.
TRC Capital was founded by Canadian securities lawyer Lorne Albaum.
Johnson Controls “strongly urges” investors to obtain current market quotations for their shares of common stock, to consult with their financial advisors and to exercise caution with respect to TRC Capital’s offer. As the offer is currently structured, stockholders who may already have tendered their shares may withdraw them by providing the written notice described in the TRC Capital offering documents prior to the expiration of the offer, which is currently scheduled for 12:01 a.m., New York City time, on Thursday, Sept. 27.
Mini-tender offers are third-party offers that seek to acquire less than 5 percent of a company’s outstanding shares. Such offers avoid many of the investor protections afforded for larger tender offers, including the filing of disclosure and other tender offer documents with the U.S. Securities and Exchange Commission (SEC), and other procedures required by U.S. securities laws.
The SEC has issued an investor alert regarding mini-tender offers. The SEC has noted that, in making the offers at below-market prices, “bidders are hoping that they will catch investors off guard if the investors do not compare the offer price to the current market price.” The SEC’s investor alert can be found at www.sec.gov/investor/pubs/minitend.htm.
“Johnson Controls encourages stockbrokers and dealers, as well as other market participants, to review both the SEC and the New York Stock Exchange (NYSE) recommendations on the dissemination of mini-tender offers,” Johnson Controls said.
The offer comes on the heels of a rather dismal summer for Johnson Controls. The long-term recommendation for the company’s stock was downgraded earlier in August by Zack’s Equity Research to “underperform.” Fitch Ratings followed by lowering its ratings outlook for Johnson Controls to “negative.”
Johnson Controls, a provider of automotive interiors, batteries and other control equipment, is facing challenges in the global markets. Weak automotive sales in Europe, pricing pressures from original equipment manufacturers and strong competition are pinching the margins for the company.