Brookfield, Caisse make big buy in automotive-battery space
A group of investors led by Brookfield Asset Management Inc.’s private equity arm agreed to buy Johnson Controls International Plc’s last remaining automotive unit for US$13.2 billion in cash in one of the biggest leveraged buyouts this year.
Brookfield Business Partners is buying the business with partners including Caisse de Depot et Placement du Quebec, Johnson Controls said in a statement Tuesday. Selling the car-battery operation will enable Johnson Controls to focus on its core building-management business.
“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,” Johnson Controls Chief Executive Officer George Oliver said.
The TermsJohnson Controls expects proceeds of $11.4 billion after tax and transaction expenses. It will spend US$3 billion to US$3.5 billion to pay down debt and keep its investment-grade credit rating, it said in the statement. The rest will go to shareholders. The unit’s sales grew 9 per cent to US$8 billion in the fiscal year ended in September, accounting for about a quarter of total revenue, the company said in a statement last week. The price represents a multiple of 7.9-times trailing 12-month Ebitda, the company said. The deal is expected to close by June 30. Centerview Partners and Barclays Plc were Johnson Controls’s financial advisers.
Johnson Controls rose 2.4 per cent in early trading in New York. The Cork, Ireland-based company’s shares had dropped 10 per cent this year through Monday.
Private Equity Deals
It’s the largest acquisition to date for Brookfield Business Partners since the division went public in 2016. Earlier this year, the firm also agreed to pay US$4.6 billion for Westinghouse Electric Co.
The Johnson Controls purchase follows a flurry of other big deals this year as private equity firms look to put capital to work. Blackstone Group LP agreed in January to buy a majority stake in Thomson Reuters Corp.’s financial and risk operations in a deal valued at US$17 billion. In June, KKR & Co. agreed to buy Envision Healthcare Corp. for US$9.9 billion, including debt. And on Monday, Veritas Capital and Elliott Management Corp. agreed to buy Athenahealth Inc. for about $5.7 billion.
Johnson Controls said in March that it was exploring strategic alternatives for the car-battery business. The company has been shifting away from the automobile sector in favor of its building-security, construction and climate-control operations after a 2016 merger with security and fire-protection giant Tyco International. Johnson Controls spun off its automotive-seat maker, Adient, the same year.