Johnson Controls expects to reap at least $150 million in annual “tax synergies” as a result of its merging with Tyco International, a deal that will include Milwaukee-based Johnson Controls moving its headquarters to Tyco’s home base in Cork, Ireland.
The acquisition, valued at $20 billion, is the latest example of corporate “inversion,” where an American-based corporation seeks to significantly reduce its U.S. tax liability by moving its corporate domicile to the foreign location of the company with which it merges.
However, Johnson Controls intends to keep its operational headquarters in Wisconsin. Tyco’s U.S. headquarters is in Princeton, N.J.
The Johnson Controls-Tyco deal—a reverse takeover in which Tyco shareholders own 44% of the combined group, and Johnson shareholders own the rest and receive a $3.9 billion cash distribution—is similar to the pharma giant Pfizer’s $160 billion combining with Ireland-headquartered Allergan, a competitor, a few weeks ago.
Ireland’s corporate tax rate is under 20%, compared to a corporate tax rate in the U.S. that can be as much as 35%. Aside from its U.S. tax reduction, Johnson Controls expects this deal to reduce it operating costs by $500 million over the first three years.
According to news outlets including the Financial Times, the Tyco brand will disappear as a result of this deal. That brand was besmirched when, in 2005, its former high-flying CEO Dennis Kozlowski and its CFO were convicted of fraud and embezzling $150 million. A 2012 spinoff from the conglomerate broke the current Tyco International into three entities, the others being Pentair and ADT. Its businesses now focus on fire protection and security products.
USA Today reports that Johnson Controls still plans to spin off its remaining automotive business into an independent company called Adient next year. Johnson Controls will focus on its primary businesses, which include batteries, building products such as HVAC units under the York brand, and climate control systems.
The combined company, with annual revenue of $32 billion, will have six Johnson Controls board members and five representing Tyco. Alex Molinaroli will be chairman and CEO. George Oliver, Tyco’s current CEO, will be president and COO for 18 months, at which point Oliver will become CEO and Molinaroli executive chairman for one year. After that, Oliver assumes the chairmanship.
“The proposed combination of Johnson Controls and Tyco represents the next phase of our transformation to become a leading global multi-industrial company,” Molinaroli said in a statement.
This deal, which is expected to be completed by the end of the year, comes at a time when both companies have been struggling to bolster their stock prices, according to the Wall Street Journal. Johnson Controls’ share price has fallen by more than 20% from its recent high, while Tyco’s price has dropped by 25%. Johnson Controls shareholders will receive one share of the combined company or cash equal to $34.88 per share, the average of Johnson’s stock price over the past five trading days.
Related Stories
Codes and Standards | Feb 8, 2023
GSA releases draft of federal low embodied carbon material standards
The General Services Administration recently released a document that outlines standards for low embodied carbon materials and products to be used on federal construction projects.
Concrete | Jan 24, 2023
Researchers investigate ancient Roman concrete to make durable, lower carbon mortar
Researchers have turned to an ancient Roman concrete recipe to develop more durable concrete that lasts for centuries and can potentially reduce the carbon impact of the built environment.
Standards | Jan 19, 2023
Fenestration Alliance updates liquid applied flashing standard
The Fenestration and Glazing Industry Alliance (FGIA) published an update to its Liquid Applied Flashing Standard. The document contains minimum performance requirements for liquid applied flashing used to provide water-resistive seals around exterior wall openings in buildings.
Sponsored | Resiliency | Dec 14, 2022
Flood protection: What building owners need to know to protect their properties
This course from Walter P Moore examines numerous flood protection approaches and building owner needs before delving into the flood protection process. Determining the flood resilience of a property can provide a good understanding of risk associated costs.
K-12 Schools | Nov 30, 2022
School districts are prioritizing federal funds for air filtration, HVAC upgrades
U.S. school districts are widely planning to use funds from last year’s American Rescue Plan (ARP) to upgrade or improve air filtration and heating/cooling systems, according to a report from the Center for Green Schools at the U.S. Green Building Council. The report, “School Facilities Funding in the Pandemic,” says air filtration and HVAC upgrades are the top facility improvement choice for the 5,004 school districts included in the analysis.
University Buildings | Nov 13, 2022
University of Washington opens mass timber business school building
Founders Hall at the University of Washington Foster School of Business, the first mass timber building at Seattle campus of Univ. of Washington, was recently completed. The 84,800-sf building creates a new hub for community, entrepreneurship, and innovation, according the project’s design architect LMN Architects.
Sponsored | Steel Buildings | Nov 7, 2022
Steel structures offer faster path to climate benefits
Faster delivery of buildings isn’t always associated with sustainability benefits or long-term value, but things are changing. An instructive case is in the development of steel structures that not only allow speedier erection times, but also can reduce embodied carbon and create durable, highly resilient building approaches.
Building Materials | Nov 2, 2022
Design for Freedom: Ending slavery and child labor in the global building materials sector
Sharon Prince, Founder and CEO of Grace Farms and Design for Freedom, discusses DFF's report on slavery and enforced child labor in building products and materials.
Multifamily Housing | Sep 15, 2022
Toronto’s B-Line Condominiums completed using prefabricated panels
B-Line Condos, Toronto, completed using Sto Panel Technology.
Mass Timber | Aug 30, 2022
Mass timber construction in 2022: From fringe to mainstream
Two Timberlab executives discuss the market for mass timber construction and their company's marketing and manufacturing strategies. Sam Dicke, Business Development Manager, and Erica Spiritos, Director of Preconstruction, Timberlab, speak with BD+C's John Caulfield.