Merger will save Johnson $150m in taxes

USA/IRELAND: Johnson Controls is to merge with Tyco, a global fire and security provider, in a deal worth $3.9bn.

Under the terms of the agreement, Johnson Controls will own about 56% of the merged company.

In what is termed an inversion deal in the US, the new company will be renamed Johnson Controls PLC with the combined company’s headquarters based in Cork, Ireland.

An inversion deal is a largely American term for the relocation of a corporation’s legal domicile to a lower-tax nation, or corporate haven. The merged businesses are expected to save at least $150m a year on taxes and at least $500m in costs over the first three years.

While Tyco’s current base in Cork will become the merged company’s legal domicile, the primary operational headquarters will be in Milwaukee, where Johnson Controls has been based.

Under the terms of the agreement, Johnson Controls shareholders will own approximately 56% of the equity of the combined company and current Tyco shareholders the remaining 44% of the equity of the combined company. 

“The proposed combination of Johnson Controls and Tyco represents the next phase of our transformation to become a leading global multi-industrial company,” stated Alex Molinaroli, chairman and chief executive officer, Johnson Controls. “With its world-class fire and security businesses, Tyco aligns with and enhances the Johnson Controls buildings platform and further positions all of our businesses for global growth. Through this transaction, we will also expand our ability to further invest globally, develop new innovative solutions for customers and return capital to shareholders.”