IRELAND – Johnson Controls and Tyco International PLC have agreed to merge in an inversion deal that will place the combined company’s headquarters in Ireland, as just reported by The Wall Street Journal.
An inversion deal is when U.S.-based companies acquire foreign-based businesses to take advantage of the more favourable tax status.
Under the terms of the agreement, Johnson Controls will own about 56% of the merged company. The new firm will be renamed Johnson Controls PLC and maintain Tyco’s Irish legal domicile.
The companies said the merged entity would save at least US $150 million a year on taxes and at least $500 million in costs over the first three years after the completion of the deal.
Under the deal, Johnson Controls shareholders will receive one share of the combined company or cash equal to $34.88 a share, a weighted average of the price of Johnson Controls’ shares over the past five trading days.
The deal’s overall value is not yet known. Johnson Controls shares have a total market value of about $23 billion, while Tyco is at about $13 billion.
Tyco focuses on fire, security and video surveillance for commercial buildings through brands such as American Dynamics, Chemguard and Sensormatic. Tyco has had slowing sales growth in recent quarters and its sales and profit outlook for 2016 lagged behind analysts’ expectations.
With Tyco’s security and fire suppression business lines, Johnson Controls would expand its equipment and services for commercial buildings where developers and building managers often look for suppliers with broad product lines. The company already provides heating and air conditioning gear under the York brand and climate-control systems.
The deal is expected to be completed in by the end of 2016.