Johnson Controls International (JCI) announced a definitive agreement to sell its Power Solutions business to Brookfield Business Partners (BBU) together with institutional partners, including Caisse de depot et placement du Quebec, in a cash transaction valued at $13.2B.
Net cash proceeds are expected to be $11.4B after tax and transaction-related expenses. The company expects to deploy $3.0B-$3.5B of proceeds towards debt paydown and retain an investment grade credit rating. The remaining proceeds will be available to return to shareholders, with more specific details to be announced around the close of the transaction.
In fiscal 2018, Power Solutions generated $8.0B in revenue and $1.68B in earnings before interest, taxes, depreciation and amortization, or “EBITDA”. The transaction price of $13.2B represents a multiple of 7.9x trailing twelve month EBITDA. The transaction is expected to close by June 30, 2019, subject to customary closing conditions and required regulatory approvals. Power Solution’s operating results will be reported in discontinued operations beginning in the first fiscal quarter of 2019.
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 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. 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.”
