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Johnson Controls and Tyco: How Will the Geographical Mix Help?

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Johnson Controls’ geographical mix

  • United States: Johnson Controls (JCI) derived $16.8 billion in revenues from the United States in fiscal 2015, which amounts to 45.1% of its total revenues, including revenues for the Automotive Experience segment.
  • Europe: Germany (EWG) accounted for $3.4 billion, or 9.1%, of Johnson Controls’ consolidated revenues in fiscal 2015. Other European countries accounted for $7.3 billion, or 19.6%, in revenues in fiscal 2015.
  • other countries: Johnson Controls (JCI) clocked $9.6 billion, or 25.8%, in revenues from other countries, including China and India (EPI).

While the United States is Johnson Controls’ largest market, its revenues are spread around the world.

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Tyco International’s geographic mix

Tyco International (TYC) operates through three segments:

  • North America Integrated Solutions & Services: This segment derives revenues from North America. It clocked $3.9 billion, or 39.4%, of its total revenues in fiscal 2015.
  • Rest of World Integrated Solutions & Services: This segment derives revenues from global markets except North America. It clocked $3.4 billion, or 34.3%, of sales revenues in fiscal 2015.
  • Global Products: This segment conducts business around the world. It reported $2.6 billion, or 26.7%, in revenues in fiscal 2015.

The synergies

Johnson Controls and Tyco International both derive significant revenues from international markets. By combining, they expect to achieve $500 million in cost synergies by increasing efficiencies and recalibrating the global network. In addition, the tax efficiencies will create value in the merger.

The combined company can also cross-sell building efficiency, safety, and security products to existing customers and guard better against competition from peers such as Ingersoll-Rand (IR).

How effectively the companies can benefit from synergies will be something to watch.

Johnson Controls and Tyco International are reporting their 1Q16 earnings on January 28 and January 29, respectively.

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