Johnson Controls Inc is in advanced talks about the possibility of acquiring fire protection and security company Tyco International Plc. (Ireland) Ordinary Share. According to media reports, the merger could be worth $20 billion. The proposed merger further affirms the fact that recent market volatility has yet to derail plans for strategic mergers.
Tweaking Core Business
A deal for Tyco comes at a time when Johnson Controls is planning to spin off its automotive seating and interior business. The Milwaukee-based company is reportedly planning to shift its focus to building efficiency and automotive battery operations thus the spin-off. Last quarter the efficiency segment brought in $2.9 billion in revenue.
Chief Executive Officer, Alex Molinaroli, is aggressively pivoting the company’s operations from the low-margin automotive business. Focus has now shifted to positioning Johnson Controls Inc as a more profitable multi-industrial company. The company is also tapping into the acquisition markets to offset revenue lost in the spin-off of the seating business.
Johnson Controls Inc has come under immense pressure in the recent past as investors continue to question its growth metrics. Its shares are down by 20%, but even Tyco seems not to be doing well, its shares having tanked by 25%.
$15-$20 Billion Inversion Deal
Tyco International Plc (Ireland) Ordinary Share should be a great addition to Johnson Controls Inc which is looking for new opportunities for growth. The company boasts of global operations servicing more than 3 million customers with fire protection and security products as well as services. With a market value of $13 billion, the Wall Street Journal reports that a deal of between $15 billion and $20 billion could be announced soon.
A deal for Tyco International Plc (Ireland) Ordinary Share could be structured as an Inversion as the company has its headquarters in Ireland. It would not be the first of the kind, as US companies continue to look for ways to take advantage of favorable tax status abroad.
Takeover activity started at a slow start this year as companies remain wary of the recent wave of selling in the markets as a slump in oil prices continues to cause havoc. Should the rumored deal come to fruition, then it is sure to affirm suggestion that the wave of mergers and acquisitions is alive and well.