adidas chile Johnson Controls to buy Ireland
maker of car batteries and heating and ventilation equipment, agreed to acquire Ireland based peer Tyco International Plc in a $16.5 billion deal that will lower its tax bill, the companies said on Monday. company to carry out a so called tax inversion after drug giant Pfizer Inc structured such a deal with Irish peer Allergan Plc last November. presidential election year.
Vermont Senator Bernie Sanders, Clinton’s opponent for the Democratic Presidential nomination, also criticized the deal, calling it a disaster for American taxpayers. tax system. Senate Finance Committee Chairman Orrin Hatch, a prominent Republican.
The merger will combine Johnson Controls’ commercial buildings business with Tyco’s fire security offerings,
accelerating Johnson Controls’ transformation following its decision to spin off its automotive parts unit.
Milwaukee based Johnson Controls has a market value $22.5 billion, while Cork, Ireland based Tyco, which specializes in fire protection systems is valued at $14.2 billion.
The deal will create savings of at least $500 million in the first three years, the companies said. They expect to save an additional $150 million a year through tax synergies.
“The move would be consistent with Johnson Control’s strategy of transforming from an auto supplier into a multi industry leader,” UBS analyst Colin Langan said in a client note.
Johnson Controls’ shares ended trading in New York on Monday down 3.9 percent at $34.21, while Tyco’s shares ended up 11.6 percent at $34.15. industrial companies in seeking tax relief by moving its legal residence offshore. The company moved its headquarters to Bermuda from Exeter,
New Hampshire in 2007, then to Switzerland in 2009, and to Cork in 2014.
Tyco said in 2014 that its move to Cork was tax neutral and that it occurred because of Swiss laws capping executive pay and tighter immigration rules.
Johnson Controls’ shareholders will own about 56 percent of the combined company, with Tyco shareholders owning the remainder, thanks in part to a cash consideration of about $3.9 billion that Johnson Controls shareholders will receive. Treasury rules, in a bid to limit inversions, placed some restrictions on deals that cross this threshold.
“The cash consideration is supplied by Tyco very much with the tax inversion in mind. This way you can engage unrestricted in strategies that free up your undistributed foreign earnings,
” said Robert Willens, a corporate tax and accounting consultant.
The new company, Johnson Controls Plc, will be initially headed by Johnson Controls Chief Executive Alex Molinaroli and will continue to trade on the New York Stock Exchange. After 18 months, Tyco’s George Oliver will become CEO and Molinaroli will become executive chair for one year, after which Oliver will become chairman and CEO.
Johnson Controls has been preparing to spin off its automotive seating and interiors business and said on Monday the spinoff was on track for early first fiscal quarter of 2017.
Shares of Johnson Controls have lost more than a quarter of their value since the start of 2015, while Tyco’s shares have fallen over 30 percent.
Tyco was broken up into three companies after turnaround expert Edward Breen took the helm from former CEO Dennis Kozlowski,
who was convicted in 2005 of grand larceny, securities fraud and other charges.
Under Breen, Tyco spun off its electronics and healthcare businesses in 2007. He expanded Tyco’s security business with the $1.9 billion acquisition of Broadview Security in 2010.
In 2012, Tyco was again broken up into three pieces one selling valves and controls for the energy market that merged with Pentair Inc , while its commercial fire and security businesses combined into “New Tyco” and traded under Tyco’s symbol. The third piece consisted of the ADT North American residential security business, now ADT Corp .
Centerview Partners and Barclays were financial advisers to Johnson Controls, while Lazard and Goldman Sachs advised Tyco. Citigroup Inc provided financing for the transaction.