Johnson Controls To Sell R&LC HVAC Businesses In $8.1 Bln Deal; Lifts Q3 Adj. EPS View

(RTTNews) - Johnson Controls International plc (JCI) Tuesday announced that it has reached a definitive agreement to sell its Residential and Light Commercial or R&LC HVAC business to the Bosch Group in an all-cash transaction valued at $8.1 billion.

Further, Johnson Controls said it now expects third-quarter adjusted earnings per share to be slightly ahead of its previous estimate.

The divesting R&LC HVAC business includes the North America Ducted business and global Residential joint venture with Hitachi, Ltd., of which Johnson Controls owns 60% and Hitachi owns 40%.

Johnson Controls' portion of the consideration is around $6.7 billion, which includes approximately $4.6 billion for its North America Ducted business, and around $2.1 billion for its interest in the Johnson Controls-Hitachi Air Conditioning joint venture.

The transaction is expected to be accretive to profit margins adjusted for the impact of equity income. The deal will be closed in approximately 12 months, subject to required regulatory approvals and other customary closing conditions.

Johnson Controls said it expects to report the operating results of the R&LC HVAC business in discontinued operations beginning in the fourth quarter.

As part of the deal, Hitachi will retain certain ductless HVAC assets located in Shimizu, Japan.

Net cash proceeds to Johnson Controls is expected to be around $5 billion. 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.

Following the deal closure, the Johnson Controls portfolio will be substantially simplified with enhanced strategic focus.

Johnson Controls' R&LC HVAC business is reported in the Global Products segment. In fiscal 2023, the R&LC HVAC business generated approximately $4.5 billion in consolidated revenue.

Johnson Controls plans to report third fiscal quarter earnings on July 31.

In pre-market activity on the NYSE, Johnson Controls shares were gaining around 1.2 percent to trade at $71.04.