Johnson Controls, a global multi-industrial firm which focuses mainly on building temperature controls and automotive batteries and interiors, in January confirmed it would merge with the Irish fire and safety systems company, which it expects will result in $1 billion in savings.
Tyco stock was trading at $45.80 this morning, up 79 cents from Thursday’s close. Johnson Controls Inc. was also trading at $45.80, up 76 cents. The Tyco stock will be discontinued and the new company will trade under JCI.
Tyco secured a $3.9 billion bank facility to finance the cash portion of the transaction. The total transaction price was not revealed, but was estimated at $16.5 billion in a Reuters report.
Tyco today 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. The transaction will be tax-free to Tyco shareholders.
Johnson Controls shareholders had 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. They voted this week, and 55.8 percent of shareholders opted to exchange their stock, while 43.1 percent did not vote and were automatically given the shares and 1.1 percent chose to cash out.
The new company will be based in Cork, Ireland, with a North American operational headquarters in the Milwaukee area.
The decision to base the new company outside the U.S. will save Johnson Controls $150 million in taxes annually in what is known as a corporate tax inversion. Some politicians and investors, who will foot some taxes, have criticized the deal and filed lawsuits opposing it.
Johnson Controls expects to have $32 billion in revenue in 2016, while Tyco has projected about $10 million in revenue.
Alex Molinaroli, Johnson Controls chairman and chief executive officer, will serve as chairman and CEO of the merged company for the first 18 months, and then a one-year term as executive chair. He will receive a $20 million payout in cash and stock as part of his change of control agreement and is eligible for a $74.2 million golden parachute if he is terminated immediately after the merger.
Tyco CEO George Oliver will serve as president and chief operating officer for 18 months and then take on the CEO role at the new company.
The Tyco merger is the culmination of a years-long transformation of Johnson Controls undertaken by Molinaroli when he became CEO. BizTimes Milwaukee detailed his restructuring efforts in a cover story in November.
Johnson Controls has about 3,400 employees in the Milwaukee area and about 130,000 employees around the globe. Tyco has about 57,000 employees at 900 locations worldwide. Tyco is expected to move some of its New Jersey operational headquarters employees to Milwaukee after the deal closes.
Next on the docket for Johnson Controls plc is its Oct. 31 spinoff of its automotive seating and interiors business Adient into a new company, which will also be based in Ireland.