Johnson Controls International plc will sell its Power Solutions business to Brookfield Business Partners L.P. together with institutional partners including Caisse de dépôt et placement du Québec in a cash transaction valued at $13.2 billion.
Johnson Controls has two main lines of business: Buildings and Power Solutions. After a strategic evaluation, the company has decided to strengthen and to invest in its global market-leading positions in Buildings: HVAC, Fire & Security and Building Management Systems.
Johnson Controls’ Power Solutions business is a world-leader working in partnership with its customers to meet increasing electrification requirements in vehicles. In fiscal 2018, Power Solutions generated $8.0 billion in revenue and $1.68 billion in earnings before interest, taxes, depreciation and amortization (EBITDA). The transaction price of $13.2 billion represents a multiple of 7.9x trailing twelve month EBITDA.
The sale of our Power Solutions business will create value for investors by streamlining our portfolio and giving us increased financial flexibility to strengthen our balance sheet, return capital to shareholders and create optionality in our Buildings business. 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.
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.—chairman and chief executive officer George Oliver
Net cash proceeds are expected to be $11.4 billion after tax and transaction-related expenses. The company expects to deploy $3.0 to $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.
The transaction is expected to close by 30 June 2019, subject to customary closing conditions and required regulatory approvals.