Johnson Controls to buy Ireland-based Tyco for $16.5 billion

Mon Jan 25, 2016 6:38pm EST
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By Greg Roumeliotis and Bernie Woodall

(Reuters) - Johnson Controls Inc (JCI.N: Quote), a U.S. maker of car batteries and heating and ventilation equipment, agreed to acquire Ireland-based peer Tyco International Plc TYC.N in a $16.5 billion deal that will lower its tax bill, the companies said on Monday.

By moving its headquarters to Cork, Ireland, Johnson Controls would become the latest major U.S. company to carry out a so-called tax-inversion after drug giant Pfizer Inc (PFE.N: Quote) structured such a deal with Irish peer Allergan Plc (AGN.N: Quote) last November.

While the tax benefits are not as profound as is the case of Pfizer's deal with Allergan, the news was enough to stir controversy among politicians in a U.S. presidential election year.

"I have a detailed and targeted plan to immediately put a stop to inversions and invest in the U.S., block deals like Johnson Controls and Tyco, and place an 'exit tax' on corporations that leave the country to lower their tax bill," Democratic Presidential candidate Hillary Clinton said in a statement.

Vermont Senator Bernie Sanders, Clinton's opponent for the Democratic Presidential nomination, also criticized the deal, calling it a disaster for American taxpayers. Others saw it as an opportunity to also highlight what they argue are the weaknesses of the U.S. tax system.

"Absent comprehensive tax reform that includes shifting to a territorial tax system with base erosion protections, Congress ought to examine viable bipartisan solutions that will effectively target and combat inversions and not tip the balance to tax-driven foreign acquisitions of U.S. firms," said U.S. Senate Finance Committee Chairman Orrin Hatch, a prominent Republican.

The merger will combine Johnson Controls' commercial buildings business with Tyco's fire security offerings, accelerating Johnson Controls' transformation following its decision to spin off its automotive parts unit.

Milwaukee-based Johnson Controls has a market value $22.5 billion, while Cork, Ireland-based Tyco, which specializes in fire protection systems is valued at $14.2 billion.   Continued...

The logo of the U.S. Johnson Controls company is seen in Nersac, southwestern France, January 31, 2008. REUTERS/Regis Duvignau