Johnson Controls considering selling Power Solutions business

Evaluation of strategic alternatives to take several months

The Johnson Controls Power Solutions headquarters.

Johnson Controls International plc announced today it is “exploring strategic alternatives” for its Power Solutions business.

Power Solutions is one of the two divisions that comprise the company, which is based in Cork, Ireland, and has its North American headquarters in Glendale. It focuses on automotive battery development and production. The Power Solutions business recorded $7.3 billion in revenue and $1.6 billion in EBITDA in 2017.

The other division is the integrated buildings technology and solutions business, which makes HVAC equipment and controls, building management systems, and fire and security systems for commercial and residential buildings. Once a multi-industrial firm, Johnson Controls would focus on just one product segment if it sold off Power Solutions. When Johnson Controls merged with Tyco International plc in 2016, it spun off its Automotive Experience division into a new company, Adient plc. Last year, it sold its Scott Safety business to 3M for $2 billion.

“Over the years, our team has built Power Solutions into an incredible business with a high-margin aftermarket model that has delivered consistent growth through business cycles,” said George Oliver, chairman and chief executive officer of Johnson Controls. “These strong fundamentals, as well as recently issued provisions of U.S. tax reform, will be taken into account as we review the alternatives and assess which option creates the best long-term results for the business and the most value for shareholders.”

The integration of Johnson Controls and Tyco was expected to result in $1 billion in cost and productivity savings, which have been proceeding ahead of schedule. But sales gains have moved at a slower pace than expected.

Johnson Controls International’s first-quarter revenue was $7.4 billion, up from $7.1 billion in the first quarter of 2017. Net income was $271 million, or 25 cents per diluted share, down from $378 million, or 35 cents per diluted share, in the first quarter of 2017.

“Creating shareholder value is our top priority,” Oliver said. “Our focus is on improving operational execution, realizing merger synergy and productivity benefits, and optimizing the business portfolio.

Johnson Controls said in its announcement it expects the exploration of strategic alternatives to take “several months,” and that it wouldn’t necessarily result in a transaction. Financial advisor Centerview Partners has been hired to lead the review.

“Johnson Controls does not intend to make any further public statements until a specific determination has been made,” the company’s statement said.

Investors have reacted positively to the news. After the announcement early this morning, Johnson Controls’ stock was up 2.6 percent in premarket trading.

The Johnson Controls Power Solutions headquarters.

Johnson Controls International plc announced today it is “exploring strategic alternatives” for its Power Solutions business.

Power Solutions is one of the two divisions that comprise the company, which is based in Cork, Ireland, and has its North American headquarters in Glendale. It focuses on automotive battery development and production. The Power Solutions business recorded $7.3 billion in revenue and $1.6 billion in EBITDA in 2017.

The other division is the integrated buildings technology and solutions business, which makes HVAC equipment and controls, building management systems, and fire and security systems for commercial and residential buildings. Once a multi-industrial firm, Johnson Controls would focus on just one product segment if it sold off Power Solutions. When Johnson Controls merged with Tyco International plc in 2016, it spun off its Automotive Experience division into a new company, Adient plc. Last year, it sold its Scott Safety business to 3M for $2 billion.

“Over the years, our team has built Power Solutions into an incredible business with a high-margin aftermarket model that has delivered consistent growth through business cycles,” said George Oliver, chairman and chief executive officer of Johnson Controls. “These strong fundamentals, as well as recently issued provisions of U.S. tax reform, will be taken into account as we review the alternatives and assess which option creates the best long-term results for the business and the most value for shareholders.”

The integration of Johnson Controls and Tyco was expected to result in $1 billion in cost and productivity savings, which have been proceeding ahead of schedule. But sales gains have moved at a slower pace than expected.

Johnson Controls International’s first-quarter revenue was $7.4 billion, up from $7.1 billion in the first quarter of 2017. Net income was $271 million, or 25 cents per diluted share, down from $378 million, or 35 cents per diluted share, in the first quarter of 2017.

“Creating shareholder value is our top priority,” Oliver said. “Our focus is on improving operational execution, realizing merger synergy and productivity benefits, and optimizing the business portfolio.

Johnson Controls said in its announcement it expects the exploration of strategic alternatives to take “several months,” and that it wouldn’t necessarily result in a transaction. Financial advisor Centerview Partners has been hired to lead the review.

“Johnson Controls does not intend to make any further public statements until a specific determination has been made,” the company’s statement said.

Investors have reacted positively to the news. After the announcement early this morning, Johnson Controls’ stock was up 2.6 percent in premarket trading.

Comments

  1. Jim Bohn says:

    I recall Fred Brengel, then CEO of Johnson Service, coming over to what was then Globe-Union, informing us that Johnson was buying the battery business around 1977. Since then the company has bought and sold off businesses one after another, going right back to the beginning. Interesting times.