Divestiture Advances Johnson Controls'
Transformation into a Pure-Play Provider of Comprehensive
Solutions for Commercial Buildings
Transaction Valued At $8.1 Billion; JCI Consideration of $6.7 Billion
Company Provides Preliminary 2024 Third Fiscal
Quarter Earnings Update
CORK,
Ireland, July 23, 2024 /PRNewswire/ -- Johnson
Controls International plc (NYSE: JCI) ("Johnson Controls" or the
"Company"), the global leader in smart, healthy, safe and
sustainable buildings, today announced it has reached a definitive
agreement to sell its Residential and Light Commercial (R&LC)
HVAC business in an all-cash transaction to the Bosch Group
("Bosch"). The transaction includes the North America Ducted
business and global Residential joint venture with Hitachi, Ltd.
("Hitachi"), of which Johnson Controls owns 60% and Hitachi owns
40%. The total transaction is valued at $8.1
billion, and the Company's portion of the consideration is
approximately $6.7 billion. As part
of the transaction, Hitachi will retain certain ductless HVAC
assets located in Shimizu, Japan.
Following the close of the transaction, the Johnson Controls
portfolio will be substantially simplified with enhanced strategic
focus, aligned with the Company's objective to be a pure-play
provider of comprehensive solutions for commercial buildings.
Johnson Controls delivers a unique value proposition to customers,
with its unmatched service and digital offerings that improve
commercial building efficiency and reduce operational costs through
its OpenBlue digital platform. The transaction represents a
significant portion of the Company's previously announced strategic
evaluation of non-core product lines.
"We are pleased to have reached this pivotal
milestone, which accelerates our transformation and positions
Johnson Controls as a simpler, higher-growth company," said Johnson
Controls Chairman and CEO George
Oliver. "Johnson Controls is already benefiting from our
transformation, which enables the unparalleled value proposition we
provide to customers, and exposure to rapidly accelerating demand
in the data center market and other key macro-economic tailwinds.
We believe Johnson Controls is well-positioned for its next phase
of growth to deliver enhanced, long-term value to
shareholders."
Johnson Controls' R&LC HVAC business, which
is reported in the Global Products segment, engineers and
manufactures ducted and ductless HVAC equipment and components
globally for both residential and light commercial applications. In
fiscal 2023, the R&LC HVAC business generated approximately
$4.5 billion in consolidated revenue.
Following the close of the transaction, the R&LC HVAC business
will continue to provide residential and light commercial HVAC
products under the York and Hitachi brands as well as Coleman,
Champion, Luxaire, Guardian, Evcon, TempMaster and others.
Christian Fischer,
the deputy chairman of the board of management of Robert Bosch
GmbH, said: "Johnson Controls' Residential & Light Commercial
business has a consistent track record of excellence within the
HVAC industry. Together with our future colleagues in the acquired
business, we want to seize the huge opportunities offered by the
market for the further growth of this new unit. The acquired
entities will strengthen Bosch's Home Comfort Group in an extremely
attractive segment and will become part of the Bosch core
business."
Transaction Details and Use of
Proceeds
The total consideration of approximately
$6.7 billion to Johnson Controls
includes approximately $4.6 billion
for its North America Ducted business representing a multiple of
16.7x fiscal 2023 EBITDA and includes approximately $2.1 billion for its interest in the Johnson
Controls-Hitachi Air Conditioning joint venture representing a
multiple of 7.5x fiscal 2023 EBITDA. The transaction is expected to
be accretive to profit margins adjusted for the impact of equity
income.
Net cash proceeds to Johnson Controls is expected
to be approximately $5.0 billion
after tax and transaction-related expenses.
Consistent with its capital allocation policy,
Johnson Controls expects to pay down debt to the extent required to
retain its investment grade rating with the remaining proceeds
available to be returned to shareholders.
In conjunction with its ongoing transformation
and this transaction, the Company has begun working on a
comprehensive restructuring plan to minimize dilution
post-close. The plan will utilize the work that has been done
on functionalization over the past few quarters and leveraging a
more streamlined business model focused on growing the Company's
commercial buildings solutions franchise.
The transaction is expected to close in
approximately 12 months, subject to required regulatory approvals
and other customary closing conditions. The Company expects to
report the operating results of the R&LC HVAC business in
discontinued operations beginning in the fourth fiscal quarter of
2024.
Johnson Controls Fiscal Q3 2024
Earnings Update
Johnson Controls expects 2024 third fiscal
quarter adjusted earnings per share to be slightly ahead of its
previously issued guidance range. The Company will report third
fiscal quarter earnings on July 31,
2024.
Advisors
Centerview Partners and Citi served as financial
advisors to Johnson Controls, Simpson Thacher served as legal
advisor, and Joele Frank served as
investor relations advisor.
Preliminary Information
Information concerning 2024 third fiscal quarter
adjusted earnings per share presented in this press release is
preliminary and may change. Johnson Controls financial closing
procedures with respect to the preliminary financial information
provided in this press release is not yet complete, and as a
result, Johnson Controls final adjusted earnings per share may vary
materially from the preliminary outlook included in this press
release. Johnson Controls undertakes no obligation to update or
supplement the information provided in this press release until
Johnson Controls releases its financial statements for the three
and nine months ended June 30, 2024.
The preliminary adjusted earnings per share outlook included in
this press release reflects Johnson Controls current estimates
based on information available as of the date of this press release
and has been prepared by management. This preliminary outlook
should not be viewed as a substitute for full financial statements
prepared in accordance with GAAP and is not necessarily indicative
of the results to be achieved for any future periods. This
preliminary outlook could be impacted by the effects of financial
closing procedures, final adjustments, and other developments.
Non-GAAP Financial Information
This press release contains disclosures regarding
adjusted earnings per share, which is a non-GAAP performance
measure. Management believes that adjusted earnings per share is
useful to investors in understanding period-over-period operating
results and business trends of Johnson Controls. Management may
also use adjusted earnings per share as a guide in forecasting,
budgeting and long-term planning processes and for compensation
purposes. Adjusted earnings per share should be considered in
addition to, and not as replacements for, GAAP EPS the most
comparable GAAP measure.
Johnson Controls International plc Cautionary
Statement Regarding Forward-Looking Statements
Johnson Controls International plc has made
statements in this press release that are forward-looking and
therefore are subject to risks and uncertainties. All statements in
this document other than statements of historical fact are, or
could be, "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. In some cases,
these forward-looking statements can be identified by the use of
words such as "outlook," "believes," "expects," "potential,"
"continues," "may," "will," "should," "could," "seeks," "projects,"
"predicts," "intends," "plans," "estimates," "anticipates" or the
negative version of these words or other comparable words. However,
the absence of these words does not mean that a statement is not
forward-looking. Forward-looking statements include, among other
things, statements relating to the sale of the RL&C business,
the satisfaction of closing conditions and the likelihood of
consummation of the transaction, the expected time period to
consummate the transaction, the anticipated benefits of the
transaction, Johnson Controls strategy, the anticipated use of
proceeds from the transaction, Johnson Controls restructuring plans
and Johnson Controls future financial performance. Johnson Controls
cautions that these statements are subject to numerous important
risks, uncertainties, assumptions and other factors, some of which
are beyond Johnson Controls' control, that could cause its actual
results and performance, including the expected impact of the
divestiture of the RL&C business, to differ materially from
those expressed or implied by such forward-looking statements,
include, among others, risks related to the ability to realize the
anticipated benefits of the divestiture, including the possibility
that expected benefits of portfolio simplification will not be
realized or will not be realized within the expected time frame;
delays in the closing of the transaction due to regulatory
approvals or other closing conditions; unfavorable reaction to the
divestiture by customers, competitors, suppliers and employees,
disruption from the transaction, making it more difficult to
maintain business and operational relationships; significant
transaction costs; and other unknown liabilities.
Other factors that could cause Johnson Controls'
actual results to differ materially from those expressed include,
among others, risks related to: Johnson Controls ability to develop
or acquire new products and technologies that achieve market
acceptance and meet applicable quality and regulatory requirements;
the ability to manage general economic, business and capital market
conditions, including the impact of recessions, economic downturns
and global price inflation; fluctuations in the cost and
availability of public and private financing for its customers; the
ability to innovate and adapt to emerging technologies, ideas and
trends in the marketplace, including the incorporation of
technologies such as artificial intelligence; the ability to manage
macroeconomic and geopolitical volatility, including shortages
impacting the availability of raw materials and component products
and the conflicts between Russia
and Ukraine and Israel and Hamas; managing the risks and
impacts of potential and actual security breaches, cyberattacks,
privacy breaches or data breaches, including business, service, or
operational disruptions, the unauthorized access to or disclosure
of data, financial loss, reputational damage, increased response
and remediation costs, legal, and regulatory proceedings or other
unfavorable outcomes; Johnson Controls ability to remediate its
material weakness; maintaining and improving the capacity,
reliability and security of Johnson Controls enterprise information
technology infrastructure; the ability to manage the lifecycle
cybersecurity risk in the development, deployment and operation of
Johnson Controls digital platforms and services; changes to laws or
policies governing foreign trade, including economic sanctions,
tariffs, foreign exchange and capital controls, import/export
controls or other trade restrictions; fluctuations in currency
exchange rates; changes or uncertainty in laws, regulations, rates,
policies, or interpretations that impact Johnson Controls business
operations or tax status; the ability to adapt to global climate
change, climate change regulation and successfully meet Johnson
Controls public sustainability commitments; risks and uncertainties
related to the settlement with a nationwide class of public water
systems concerning the use of AFFF; the outcome of litigation and
governmental proceedings; the risk of infringement or expiration of
intellectual property rights; Johnson Controls ability to manage
disruptions caused by catastrophic or geopolitical events, such as
natural disasters, armed conflict, political change, climate
change, pandemics and outbreaks of contagious diseases and other
adverse public health developments; the ability of Johnson Controls
to drive organizational improvement; any delay or inability of
Johnson Controls to realize the expected benefits and synergies of
recent portfolio transactions; the ability to hire and retain
senior management and other key personnel; the tax treatment of
recent portfolio transactions; significant transaction costs and/or
unknown liabilities associated with such transactions; labor
shortages, work stoppages, union negotiations, labor disputes and
other matters associated with the labor force; and the cancellation
of or changes to commercial arrangements. Investors are therefore
cautioned not to place undue resilience on any forward- looking
statements. A detailed discussion of risks related to Johnson
Controls business is included in the section entitled "Risk
Factors" in Johnson Controls Annual Report on Form 10-K for the
2023 fiscal year filed with the SEC, which is available at
www.sec.gov and www.johnsoncontrols.com under the "Investors" tab.
Shareholders, potential investors and others should consider these
factors in evaluating the forward-looking statements and should not
place undue reliance on such statements. The forward-looking
statements included in this press release are made only as of the
date of this document, unless otherwise specified, and, except as
required by law, Johnson Controls assumes no obligation, and
disclaims any obligation, to update such statements to reflect
events or circumstances occurring after the date of this press
release.
About Johnson Controls
At Johnson Controls (NYSE: JCI), we transform the
environments where people live, work, learn and play. As the global
leader in smart, healthy and sustainable buildings, our mission is
to reimagine the performance of buildings to serve people, places
and the planet.
Building on a proud history of nearly 140 years
of innovation, we deliver the blueprint of the future for
industries such as healthcare, schools, data centers, airports,
stadiums, manufacturing and beyond through OpenBlue, our
comprehensive digital offering.
Today, with a global team of 100,000 experts in
more than 150 countries, Johnson Controls offers the world's
largest portfolio of building technology and software as well as
service solutions from some of the most trusted names in the
industry.
Visit www.johnsoncontrols.com for more
information and follow @Johnson Controls on
social platforms.
About the Bosch Group*
The Bosch Group is a leading global supplier of
technology and services. It employs roughly 429,000 associates
worldwide (as of December 31, 2023).
The company generated sales of 91.6 billion
euros in 2023. Its business operations are divided into four
business sectors: Mobility, Industrial Technology, Consumer Goods,
and Energy and Building Technology. Through its business
operations, the company wants to help give technological shape to
universal trends such as automation, electrification,
digitalization, and connectivity, as well as an orientation to
sustainability. Bosch's broad diversification across regions and
industries strengthens its innovativeness and robustness.
Bosch uses its proven expertise in sensor
technology, software, and services to offer customers cross-domain
solutions from a single source. It also applies its expertise in
connectivity and artificial intelligence in order to develop and
manufacture user-friendly, sustainable products. With technology
that is "Invented for life," Bosch wants to help improve quality of
life and conserve natural resources. The Bosch Group comprises
Robert Bosch GmbH and its roughly 470 subsidiary and regional
companies in over 60 countries. Including sales and service
partners, Bosch's global manufacturing, engineering, and sales
network covers nearly every country in the world. Bosch's
innovative strength is key to the company's further development. At
136 locations across the globe, Bosch employs some 90,000
associates in research and development, of which nearly 48,000 are
software engineers.
About Hitachi, Ltd.*
Hitachi drives Social Innovation Business,
creating a sustainable society through the use of data and
technology. We solve customers' and society's challenges with
Lumada solutions leveraging IT, OT (Operational Technology) and
products. Hitachi operates under the 3 business sectors of "Digital
Systems & Services" – supporting our customers' digital
transformation; "Green Energy & Mobility" – contributing to a
decarbonized society through energy and railway systems, and
"Connective Industries" – connecting products through digital
technology to provide solutions in various industries. Driven by
Digital, Green, and Innovation, we aim for growth through
co-creation with our customers. The company's revenues as 3 sectors
for fiscal year 2023 (ended March 31,
2024) totaled 8,564.3 billion
yen, with 573 consolidated subsidiaries and approximately
270,000 employees worldwide.
For more information on Hitachi, please visit the
company's website at https://www.hitachi.com.
* Certain information contained herein has been
obtained from third parties, and in certain cases have not been
updated through the date hereof. While these third-party sources
are believed to be reliable, Johnson Controls does not give any
representation or warranty as to the accuracy, adequacy, timeliness
or completeness of any of such information, assumes no
responsibility for independent verification of such information,
and expressly disclaims any responsibility or liability
thereof.
Investor Contacts:
Jim Lucas
Direct: 1-414-340-1752
Email: jim.lucas@jci.com
Media Contact:
Danielle Canzanella
Direct : 1-414-524-8687
Email : media@jci.com
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SOURCE Johnson Controls, Inc.