York, with estimated sales of nearly $5 billion, will become part of the nearly $6 billion Controls Group of Johnson Controls. The combination of the Controls Group and York is expected to increase Johnson Controls rate of growth in the $200 billion industry for global building environments. Johnson Controls fiscal 2005 consolidated sales from continuing operations, including its automotive seating/interiors and battery businesses, are forecast at nearly $28 billion.
Under the definitive agreement unanimously approved by the boards of directors of both companies, Johnson Controls will acquire York in an all-cash transaction in which York shareholders will receive $56.50 for each outstanding share of York common stock. The total value of the acquisition is anticipated to be approximately $3.2 billion, including the assumption of approximately $800 million of York debt. Johnson Controls expects to finance the transaction with short and long-term borrowings.
The transaction is expected to be modestly accretive to Johnson Controls earnings per share in fiscal 2006. Over $275 million of annual synergies, primarily related to cost efficiencies and a lower effective tax rate, are anticipated to be achieved by 2008.
The combination of York, a leader in the manufacturing and service of heating and cooling equipment, with Johnson Controls, an industry leader in the technologies which control that equipment, is a natural and strategic growth opportunity. In addition, Johnson Controls global market reach will be enhanced, as the businesses collectively serve customers from over 500 sales and service offices and reach more than 125 countries. The two companies are market leaders in North America and Europe, and have complementary operations in the faster growing regions of Asia (especially China), Central Europe, the Middle East and Latin America.
John M. Barth, chairman and chief executive officer of Johnson Controls, said, "Johnson Controls and York are ideal partners, and this transaction will bring significant benefits to shareholders, customers and employees of both companies. By joining with York, a market leader with a strong growth outlook, Johnson Controls is staking out a strategic leadership position in the global building environments industry that will offer significant growth potential and synergies with our Controls business. Importantly, Johnson Controls will maintain its strong financial position, while substantially diversifying our business mix."
He added, "The transaction will enable us to become a single source of integrated products and services that building owners want in order to optimize comfort and energy efficiency. With the addition of York, we will have enhanced HVAC and R, controls, fire and security capabilities. Bringing together our two organizations will also create the largest building services force in the world, strongly positioning us to capture an increased share of the fragmented $130 billion global services market for commercial buildings."
C. David Myers, president and chief executive officer of York, said, "Our business continues to strengthen and is at the point where it is in the best interests of our shareholders, customers and employees to join forces with an industry leader in control systems and services. The combination of these two great companies, with similar cultures of innovation, critical values and customer service, points toward an outstanding future. We look forward to working with Johnson Controls and delivering the benefits of this exciting transaction."
"We're confident that we'll achieve the resulting growth and cost synergies available through the pairing of these two companies," Barth said. "Johnson Controls has a long history of successfully integrating and growing companies we've acquired. We're excited about joining with York to continue building on the success of these two great brands and bringing value to our shareholders."
Johnson Controls said that the acquisition would improve the balance of its consolidated sales and earnings among its three businesses. On a pro forma basis assuming the acquisition was completed on September 30, 2004, and using analyst 2005 consensus estimates for York, Johnson Controls projected consolidated sales for 2005 would be comprised of 32% Controls/HVACR, 9% Battery and 59% Automotive Seating/Interiors.
Johnson Controls anticipates the transaction will close in December 2005, subject to customary closing conditions that include regulatory approvals and York shareholder approval. York's board of directors has unanimously recommended that York shareholders vote in favor of the transaction at a shareholders meeting that will be scheduled as soon as practicable.