Johnson Controls International Plc announced this week that it is selling its power solutions business to investment company Brookfield Business Partners L.P. in a deal valued at $13.2 billion. Johnson Controls’ power solutions business build advanced car battery technologies for nearly every type of vehicle. Johnson Controls’ batteries are used in about one-third of cars around the world.
Why Johnson Controls selling the business? The company is planning to focus on building its technologies and solutions businesses such as heating, ventilation, air condition, building access control systems, and fire detection tools going forward.
“Today’s announcement marks a significant milestone in the ongoing transformation of the Johnson Controls portfolio,” said chairman and CEO George Oliver. “The sale of our Power Solutions business will create value for investors by streamlining our portfolio and giving us 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 capitalize on secular growth trends and to deliver strong financial performance through improved free cash flow conversion, lower capital intensity and continued margin expansion.”
The net cash proceeds are expected to be $11.4 billion following tax and transaction-related expenses. Johnson Controls is also expecting to deploy $3 billion to $3.5 billion of proceeds towards paying down debt and retaining an investment credit rating. And the remaining proceeds are going to be available to return to shareholders.
This year, Johnson Controls’ Power Solutions generated $8 billion in revenue and $1.68 billion in EBITDA. So the transaction price represents a multiple of 7.9x trailing one year of EBITDA.
Centerview Partners and Barclays served as the financial advisors to Johnson Controls. And Simpson Thacher served as the legal advisors.