Tyco International to be bought by Johnson Controls
Tyco International, the industrial conglomerate based in the Princeton area, has agreed to be bought by Johnson Controls, a $40 billion, Milwaukee-based auto-parts and smart-buildings systems supplier, for $20 billion in cash and stock.
Tyco International, the industrial conglomerate based in the Princeton area, has agreed to be bought by Johnson Controls, a $40 billion, Milwaukee-based auto-parts 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 last two years.
Tyco stock jumped $3.56, or 11.6 percent, to $34.15, the biggest gain in the S&P 500. Johnson lost $1.39, or 3.9 percent, to $34.21.
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 United States) and Berwyn-based TE Connectivity, among others, starting in 2005.
After the merger, which the companies hope to conclude this year, Johnson's "primary operational headquarters will be in Milwaukee," spokesman Fraser Engerman said. As to the future of Tyco's Mercer County offices, "we're not speculating."
Johnson facilities in the Philadelphia region include a battery factory, part of the Power Solutions division, in Middletown, Del.; a Building Efficiency controls factory in East Greenville, Montgomery County; and Building Efficiency warehouses in Audubon, Montgomery County, and Hainesport. Johnson also owns York Heating & Air Conditioning in York, Pa.
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 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 a half-billion dollars in yearly expenses by eliminating duplicate office workers and other staff and facilities, plus tax savings of $150 million annually.
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. Breen is CEO and chairman of the 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 Duperreault, 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 & Haas, who sold the company to Dow Chemical and now heads Avantor Performance Materials; Frank Drendel, founder of Commscope Inc.; and David Yost, ex-CEO at drug distributor AmerisourceBergen.
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