Ireland-based Johnson Controls International has entered a definitive $13.2bn agreement to sell its power solutions business to Brookfield Business Partners together with institutional partners that include Caisse de dépôt et placement du Québec.
The divestment is reported to be part of the on-going transformation of the Johnson Controls portfolio.
Johnson Controls chairman and CEO George Oliver said: “The sale of our power solutions business will create value for investors by streamlining our portfolio and giving us the increased financial flexibility to strengthen our balance sheet, return capital to shareholders and create optionality in our Buildings business.
“This focused portfolio will allow us to capitalise on secular growth trends and to deliver strong financial performance through improved free cash flow conversion, lower capital intensity and continued margin expansion.”
The company intends to use up to $3.5bn of $11.4bn proceeds towards payments of debt and retain an investment grade credit rating, while the remaining proceeds will be returned to the shareholders. It will also help the company to buy up rivals in an industry with many smaller competitor firms.
Oliver further added: “With this transaction, Johnson Controls becomes a pure-play building technologies and solutions provider that is better positioned to lead the integration and evolution of the connected building and to capture strategic opportunities in the HVAC industry.”
Completion the deal is expected to take place by 30 June next year, subject to customary closing conditions and required regulatory approvals.
In 2016, Johnson Controls merged with security systems company Tyco, moving from Milwaukee, US, to Cork in Ireland. It also sold off its car-seat maker business Adient Plc in the same year and a safety-equipment business to multinational conglomerate 3M in 2017.
For this transaction, Centerview Partners and Barclays served as financial advisors to Johnson Controls, while Simpson Thacher served as legal advisor.