Glendale-based global multi-industrial firm Johnson Controls Inc. today confirmed it plans to acquire Irish fire and safety company Tyco International plc, and revealed that the combined company’s global headquarters and legal domicile will be in Cork, Ireland.
Known as a tax inversion, this shift in legal domicile to a country with lower taxes can have large tax benefits for the U.S. company. The strategy has recently been criticized by U.S. politicians for taking away tax revenue from the U.S. government.
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. Johnson Controls said in a release that the deal is expected to create $650 million in synergies for the combined firm. The transaction is expected to close at the end of 2016, and the new company’s shares will continue to trade under the JCI ticker on the New York Stock Exchange.
Johnson Controls plc’s primary North American operational headquarters will be in the Milwaukee area. The company aims to serve as a leader in controls, fire, security, HVAC, power solutions and energy storage products that serve a variety of industries.
Johnson Controls is also in the process of spinning off its automotive seating and interiors business into a new company, which will be called Adient. The timeline of that spinoff has been pushed back from October 3, 2016 to early 2017. Under the new merger deal, shares of Adient will be distributed to Johnson Controls and Tyco shareholders.
“The proposed combination of Johnson Controls and Tyco represents the next phase of our transformation to become a leading global multi-industrial company,” said Alex Molinaroli, chairman and chief executive officer of Johnson Controls. “With its world-class fire and security businesses, Tyco aligns with and enhances the Johnson Controls buildings platform and further positions all of our businesses for global growth. Through this transaction, we will also expand our ability to further invest globally, develop new innovative solutions for customers and return capital to shareholders.”
“The combination of Tyco and Johnson Controls is a highly strategic, value-enhancing step that brings together the unique strengths of two great companies to deliver best-in-class building technologies and services to customers around the world,” said George Oliver, chief executive officer of Tyco. “We believe this transaction will allow us to better capture opportunities created by increased connectivity in homes, buildings and cities. Joining forces with Johnson Controls pairs our leading established businesses with robust innovation pipelines and extensive global footprints to deliver greater value to customers, shareholders and employees of both companies.”