Johnson Controls Sells Power Solutions Division for $13.2B
JCI’s power solutions business makes and distributes about 154 million lead-acid batteries for passenger cars and light trucks annually.
MILWAUKEE — Johnson Controls Int’l (NYSE: JCI) has reached an agreement to sell its power solutions business, which manufacturers batteries, to investment firm Brookfield Business Partners L.P., in a cash deal valued at $13.2 billion.
The transaction “marks a significant milestone in the ongoing transformation of the Johnson Controls portfolio,” JCI Chairman and CEO George Oliver announced Tuesday. “The sale of our power solutions business will create value for investors by streamlining our portfolio and giving us increased financial flexibility to strengthen our balance sheet, return capital to shareholders and create optionality in our Buildings business.”
Oliver continued, the company’s “focused portfolio will allow us to capitalize on secular growth trends and to deliver strong financial performance through improved free cash flow conversion, lower capital intensity and continued margin expansion.”
Net cash proceeds are expected to be $11.4 billion after tax and transaction-related expenses, according to the company. JCI expects to deploy $3 to $3.5 billion of proceeds toward paying down debt and retain an investment grade credit rating. The remaining proceeds will be available to return to shareholders, with more specific details to be announced around the close of the transaction.
“With this transaction, Johnson Controls becomes a pure-play building technologies and solutions provider that is better positioned to lead the integration and evolution of the connected building and to capture strategic opportunities in the HVAC industry,” Oliver states. “I would like to thank the power solutions team for their significant contributions over the years and their dedication throughout the strategic review process.”
JCI’s power solutions business makes and distributes about 154 million lead-acid batteries for passenger cars and light trucks annually. In fiscal 2018, the division generated $8 billion in revenue and $1.68 billion in earnings before interest, taxes, depreciation and amortization. The transaction price of $13.2 billion represents a multiple of 7.9x trailing 12-month EBITDA.
Divesting the power solution division marks the biggest shake-up at JCI since its merger in 2016 with Tyco Int’l. The transaction is expected to close by June 30, 2019, subject to customary closing conditions and required regulatory approvals. Power solution’s operating results will be reported in discontinued operations beginning in the first fiscal quarter of 2019.
Centerview Partners and Barclays served as financial advisors to Johnson Controls, and Simpson Thacher served as legal advisors.
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