A tough government stance on inversion rules notwithstanding, shareholders approved the $14 billion merger between Johnson Controls Inc. (JCI) and Tyco International PLC (TYC). According to a press release issued by Johnson Controls, 97% of the votes (representing 81% of the company's shareholders) were cast in favor of the deal. Tyco shareholders had already approved the deal yesterday. The merger is expected to be completed by September 2. (For more, see also: Johnson Controls Trades Ex-Dividend.)
“I am pleased our shareholders have voted in favor of this powerful strategic combination, which will unite two world-class companies with complementary capabilities" Alex Molinaroli, chairman and CEO of Johnson Controls, stated. The merger creates a building and equipment behemoth with over $30 billion in revenue. Leadership for the merged entity will rotate between chief executives at both companies. Molinaroli will lead the merged entity for the first 18 months and will be followed by Tyco CEO George Oliver for the next 18 months.
There are several benefits to the merger.
For starters, the combined company is expected to have annual tax savings of $150 million. This is because Tyco is domiciled in Ireland, which has a corporate tax rate of 12.5%, as opposed to the United States, which has a corporate tax rate of 35%. When you add that figure to the operational cost-cuttings and synergies worth $350 million that will be realized as part of the deal, the expected savings figure snowballs to $500 million at the end of the third year. (For more, see also: Analyzing Johnson Controls’ Returns On Equity.)
Second, the merger could bolster operations for both companies in multiple geographies. A large chunk of both companies’ revenues comes from overseas. For example, Johnson Controls reported a 49% jump in revenues for its automotive experience unit, which reported revenues of $344 million, in China. Similarly, Tyco has a strong presence in Europe.
Finally, the merger will result in a company that is better positioned to make the transition to the Internet of Things (IoT) ecosystem, where home devices and buildings are increasingly connected to the internet.
The merger has happened despite rhetoric from the Department of Justice against such transactions. The Obama government has unveiled a number of proposals and rules to curb takeovers of American multinational corporations by companies based in low-tax regimes. Last year, the government’s rules helped prevent one such merger between Chicago-based AbbVie Inc. (ABBV) and Shire PLC (SHPG).
Courtesy : Investopedia
“I am pleased our shareholders have voted in favor of this powerful strategic combination, which will unite two world-class companies with complementary capabilities" Alex Molinaroli, chairman and CEO of Johnson Controls, stated. The merger creates a building and equipment behemoth with over $30 billion in revenue. Leadership for the merged entity will rotate between chief executives at both companies. Molinaroli will lead the merged entity for the first 18 months and will be followed by Tyco CEO George Oliver for the next 18 months.
There are several benefits to the merger.
For starters, the combined company is expected to have annual tax savings of $150 million. This is because Tyco is domiciled in Ireland, which has a corporate tax rate of 12.5%, as opposed to the United States, which has a corporate tax rate of 35%. When you add that figure to the operational cost-cuttings and synergies worth $350 million that will be realized as part of the deal, the expected savings figure snowballs to $500 million at the end of the third year. (For more, see also: Analyzing Johnson Controls’ Returns On Equity.)
Second, the merger could bolster operations for both companies in multiple geographies. A large chunk of both companies’ revenues comes from overseas. For example, Johnson Controls reported a 49% jump in revenues for its automotive experience unit, which reported revenues of $344 million, in China. Similarly, Tyco has a strong presence in Europe.
Finally, the merger will result in a company that is better positioned to make the transition to the Internet of Things (IoT) ecosystem, where home devices and buildings are increasingly connected to the internet.
The merger has happened despite rhetoric from the Department of Justice against such transactions. The Obama government has unveiled a number of proposals and rules to curb takeovers of American multinational corporations by companies based in low-tax regimes. Last year, the government’s rules helped prevent one such merger between Chicago-based AbbVie Inc. (ABBV) and Shire PLC (SHPG).
Courtesy : Investopedia
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