Can Johnson Controls Exit Its Power Business?

Industrial firm Johnson Controls International PLC (NYSE: JCI) announced this morning that the company is conducting a strategic review of its Power Solutions business. The Ireland-based company supplies car batteries under a variety of brand names to customers including Walmart, Costco and Advanced Auto Parts.

Johnson Controls also supplies OEM and aftermarket batteries to automakers and retailers around the world. The company produces about a third of world’s auto batteries — 152 million — every year. Of Johnson’s $30 billion in 2017 revenues, the Power Solutions business generated $7.3 billion.

CEO George Oliver said:

Creating shareholder value is our top priority. Our focus is on improving operational execution, realizing merger synergy and productivity benefits, and optimizing the business portfolio. Given the differing dynamics of the platforms, we are evaluating strategic alternatives for Power Solutions.

According to Oliver, the announcement reflects Johnson’s strategic priority to strengthen and invest in its global market-leading positions in heating, ventilation and air conditioning (HVAC); fire and security solutions; and integrated building management systems, all of which operate in vertical markets with strong growth prospects.

Johnson has been developing a range distributed energy storage products for building automation systems and building integration.

The company manufactures its batteries in China and in Michigan. Potential buyers for this business are probably not thick on the ground. A betting person would take the odds that Johnson hopes to find a Chinese buyer, but the company may have waited too long. The Chinese government is paying more attention now to loans to Chinese companies to make sizable acquisitions.

Johnson’s stock traded up about 3.3% Monday morning at $39.80 after closing at $38.54 on Friday. The 52-week range is $34.51 to $44.37 and the 12-month price target is $42.79.

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