Tyco International, the $10 billion (yearly sales), Princeton-based industrial conglomerate, has agreed to be purchased by Johnson Controls, a $40 billion, Milwaukee-based auto-parts, batteries and smart-buildings systems supplier, for $20 billion in cash and stock. That works out to $34.88 a share, a small premium to Tyco's recent trading price but a discount to its value over most of the past two years. Johnson Controls statement on the Tyco deal here.
After the merger, which the companies hope to conclude later this year, Johnson Controls' "primary operational headquarters will be in Milwaukee," spokesman Fraser Engerman told me. As to the future of Tyco's Mercer County offices, "we're not speculating."
Tyco's major businesses include building fire-suppression, security and utility systems; it was a $40 billion company before selling off assets, including ADT alarms (in the U.S.) and Berwyn-based TE Connectivity, among others, starting in 2005. The partners plan to nominally base the combined company in Tyco's legal homeland, Ireland, in an attempt to avoid higher U.S. corporate income taxes. Johnson Controls boss Alex Molinaroli will initially run the combined companies, but Tyco boss George Oliver is supposed to replace him after 18 months.
In a conference call with investors, Molinaroli said the combined companies are well-positioned to join forces and boost production and sales of automated building maintenance systems and other industrial products. The companies hope to cut more than half a billion dollars in yearly expenses by cutting duplicate office workers and other staff and facilities, plus tax savings of $150 million/year.
Johnson Controls' facilities in the Philadelphia region includes a battery factory (the Power Solutions division) in Middletown, Del.; and a Building Efficiency controls factory in East Greenville, Montgomery County, Pa., plus Building Efficiency warehouses in Audubon, Pa. and Hainesport, N.J.; and York-based York Heating & Air Conditioning, with facilities in many communities.
Six Johnson Controls directors and five Tyco directors will serve on the combined board. Tyco's current chairman is Edward Breen, who as Tyco's former CEO broke up the unwieldy company through asset sales and spin-offs. Besides his Tyco board role, Breen is CEO and Chairman of DuPont Co., which he is planning to combine with Dow Chemical Co., then split into three companies. He is also lead director of Comcast Corp.
Tyco's lead director is Brian Duperrault, a former top executive at insurer Ace Ltd., which, like Tyco, is based overseas for tax advantages. Other Tyco directors include Raj Gupta, the last CEO of Rohm and Haas, who sold the company to Dow Chemical, and now heads Avantor Performance Materials; Frank Drendel, founder of Commscope Inc.; and Robert D. Yost, ex CEO at drug distributor AmerisourceBergen.