Tyco and Johnson Controls Set for Merger and Tax Inversion

Tyco International PLC (NYSE: TYC) and Johnson Controls Inc. (NYSE: JCI) made waves in the market early on Monday on news of a merger and tax inversion. The companies announced that they have entered into a definitive merger agreement wherein Johnson Controls will combine with Tyco to create a leader in building products and technology, integrated solutions and energy storage.

Both boards of directors have unanimously approved the agreement, but it is still subject to regulatory and shareholder approval.

Under the terms of the agreement, Johnson Controls shareholders will own about 56% of the equity of the combined company and receive aggregate cash consideration of approximately $3.9 billion. Current Tyco shareholders will own roughly 44% of the equity of the combined company.

The combined business will be renamed Johnson Controls PLC. The companies expect that shares of the combined company will be listed on the New York Stock Exchange under Johnson Controls’ current ticker.

After the transaction closes, the newly combined company is expected to maintain Tyco’s Irish legal domicile and global headquarters in Cork, Ireland. The primary operational headquarters in North America for the combined company will be in Milwaukee, where Johnson Controls has been based.

Alex Molinaroli, chairman and CEO of Johnson Controls, commented:

The proposed combination of Johnson Controls and Tyco represents the next phase of our transformation to become a leading global multi-industrial company. With its world-class fire and security businesses, Tyco aligns with and enhances the Johnson Controls buildings platform and further positions all of our businesses for global growth. Through this transaction, we will also expand our ability to further invest globally, develop new innovative solutions for customers and return capital to shareholders.

George R. Oliver, CEO of Tyco, added:

The combination of Tyco and Johnson Controls is a highly strategic, value-enhancing step that brings together the unique strengths of two great companies to deliver best-in-class building technologies and services to customers around the world. We believe this transaction will allow us to better capture opportunities created by increased connectivity in homes, buildings and cities. Joining forces with Johnson Controls pairs our leading established businesses with robust innovation pipelines and extensive global footprints to deliver greater value to customers, shareholders and employees of both companies.

Shares of Tyco were trading up more than 6% Monday morning to $32.53, with a consensus analyst price target of $37.44 and a 52-week trading range of $28.94 to $44.00.

Johnson Controls shares were trading down almost 3% at $34.55, with a consensus price target of $50.12 and a 52-week range of $33.62 to $54.52.