Johnson Controls closes sale of its Power Solutions business; including seven facilities in Mexico
Johnson Controls International plc announced it has reached a definitive agreement to sell its Power Solutions business to Brookfield Business Partners L.P. together with institutional partners in a cash transaction valued at US$ 13.2 billion.
“Today’s announcement marks a significant milestone in the ongoing transformation of the Johnson Controls portfolio,” said chairman and chief executive officer George Oliver, who claimed the sale will create value for investors by streamlining the company’s portfolio and increasing financial flexibility to strengthen the balance sheet, return capital to shareholders and create optionality in the Buildings division. Net cash proceeds are expected to be US$ 11.4 billion after tax and transaction-related expenses.
“This focused portfolio will allow us to capitalize on secular growth trends and to deliver strong financial performance through improved free cash flow conversion, lower capital intensity and continued margin expansion,” Oliver added.
The company expects to deploy US$ 3 to US$ 3.5 billion of proceeds towards debt paydown and retain an investment grade credit rating. The remaining proceeds will be available to return to shareholders, with more specific details to be announced around the close of the transaction.
Mr. Oliver continued, “with this transaction, Johnson Controls becomes a pure-play building technologies and solutions provider that is better positioned to lead the integration and evolution of the connected building and to capture strategic opportunities in the HVAC industry. I would like to thank the Power Solutions team for their significant contributions over the years and their dedication throughout the strategic review process.”
Johnson Controls’ Power Solutions business manufactures batteries of the Varta, Heliar, LTH, MAC, Optima and Delkor brands. Its products are used in about a third of cars globally.
In Mexico, the unit operates four manufacturing facilities and two recycling centers in the states of Nuevo Leon, Guanajuato and Coahuila. In the state of Nuevo Leon, it also operates a laboratory and corporate offices.
In fact, one of those sites, a 255,772 square feet plant located in the municipality of Ciénega de Flores, which produces more than 2 million batteries per year, received the 2016 Best Plant Award by IndustryWeek.
Conservative estimates place the company’s annual output capacity in Mexico above 25 million batteries. Its global capacity is about 154 million.
In fiscal 2018, Power Solutions generated US$ 8.0 billion in revenue and US$ 1.68 billion in earnings before interest, taxes, depreciation and amortization (EBITDA).
The transaction is expected to close by June 30, 2019, subject to customary closing conditions and required regulatory approvals. Power Solution’s operating results will be reported in discontinued operations beginning in the first fiscal quarter of 2019.
Centerview Partners and Barclays served as financial advisors to Johnson Controls, and Simpson Thacher served as legal advisors.