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January 25, 2016

Johnson Controls and Tyco to merge

A big deal under which Johnson Controls would acquire Tyco, a fire protection and security company, is said to be at an ‘advanced’ stage of discussions.

By David Leggett

Johnson Controls and Tyco have announced that they have entered into a definitive merger agreement under which Johnson Controls will combine with Tyco, a global fire and security provider, to create a “leader in building products and technology, integrated solutions and energy storage”.

The deal is being seen as a potentially major development in the company’s stated desire to refocus its operations and move out of automotive.

Under the terms of the agreement, which has been unanimously approved by both companies’ Boards of Directors, Johnson Controls shareholders will own approximately 56 percent of the equity of the combined company and receive aggregate cash consideration of approximately $3.9 billion. Current Tyco shareholders will own approximately 44 percent of the equity of the combined company.

 “The proposed combination of Johnson Controls and Tyco represents the next phase of our transformation to become a leading global multi-industrial company,” stated Alex Molinaroli, chairman and chief executive officer, 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 R. Oliver, chief executive officer, 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.”

Under the terms of the proposed transaction, the businesses of Johnson Controls and Tyco will be combined under Tyco International plc, which will be renamed “Johnson Controls plc.” The companies expect that shares of the combined company will be listed on the New York Stock Exchange and trade under the “JCI” ticker.  Upon the closing of the transaction, the combined company is expected to maintain Tyco’s Irish legal domicile and global headquarters in Cork, Ireland. The primary operational headquarters in North America for the combined company will be in Milwaukee, where Johnson Controls has been based.

The deal is being seen as a potentially major development in the company’s stated desire to refocus its operations and move out of automotive. Johnson Controls is preparing to spin off its automotive seating and interiors business in order to focus on its building efficiency and automotive battery activities.

Reuters noted earlier that a deal between Johnson Controls and Tyco, which have market capitalisations of US$23bn and US$13bn, would demonstrate that big strategic mergers are going ahead in spite of recent stock market volatility.

See also: JCI confirms automotive exit as supplier eddies swirl

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