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Johnson Controls: In the Midst of a Transformation

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Merger announcement

On Monday, January 25, 2016, Johnson Controls (JCI) announced it has entered into a definitive merger agreement with Tyco International (TYC). JCI shareholders will retail 56% share in the combined entity. Tyco shareholders will get the remaining share. Before we dissect the deal in detail, let’s have a quick look at both companies.

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About Johnson Controls

Based in Milwaukee, Wisconsin, Johnson Controls (JCI) offers products and services related to automotive batteries, energy storage, automotive seating and interiors, and building systems. It’s the world leader in the automotive batteries segment, beating peers such as Exide Technologies and automakers such as Ford (F). Johnson Controls clocked $38.7 billion in revenues and $1.2 billion in net income in fiscal 2015, which ended in September 2015.

The company has recently announced plans to spin off its largest segment, Automotive Experience, by October 2016. Automotive Experience provides products and services related to automotive seating and interiors. The segment will be spun off into a new public company called Adient. The segment accounted for more than 50% of JCI’s consolidated revenues in fiscal 2015. JCI and Magna International (MGA) are currently world leaders in the segment. JCI accounts for 1.1% of the total holdings of the Consumer Discretionary Select Sector SPDR ETF (XLY).

About Tyco International

Headquartered in Ireland, Tyco International (TYC) provides security solutions and fire protection technologies. Tyco generated $9.9 billion in revenues in fiscal 2015, which ended in September 2015.

In the next part of this series, we’ll take a detailed look at the merger deal.

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