Johnson Controls (JCI) To Sell Power Solutions Unit For $13B

Johnson Controls International plc (NYSE:JCI) has announced that it is selling its power solutions business to Brookfield Business Partners L.P. and institutional partners (jointly, "Brookfield"). A definitive agreement has been signed between Johnson Controls and Brookfield for the sell-off, which is valued at a cash transaction of $13.2 billion. Depending on regulatory approvals and closing conditions, the transaction is anticipated to close by Jun 30, 2019.

Out of the total cash transaction, net cash proceeds are anticipated to be $11.4 billion after deducting tax-related expenses. Johnson Controls expects to use $3-$3.5 billion in debt repayment while the rest will be returned to shareholders. A complete detail on the cash proceeds usage will be reported after the closing of the transaction.

The company started weighing on alternatives for the power solutions unit in March. Apart from this, it functions through another segment i.e. building technologies & solutions.

Johnson Controls International plc Price and Consensus

The sale of the unit will aid Johnson Controls to focus on its building technologies & solutions segment, which is better placed for the integration and development of connected building. Per management, its building technologies have better possibility of capturing opportunities in the HVAC industry.

The company’s power solutions business is a manufacturer and distributor of advanced battery technologies for vehicles across the globe. The division also works in partnership with its customers to meet evolving electrification requirements in cars.

In the last week, Johnson Controls announced its fiscal 2018 results. During the fiscal, the company’s power solutions unit generated revenues of $8 billion, and earnings before interest, taxes, depreciation and amortization ("EBITDA") of $1.7 billion.

Price Performance

In the past three months, Johnson Controls’ stock has lost 7.4%, outperforming 9.6% decrease recorded by the industry it belongs to.

Zacks Rank & Key Picks

Johnson Controls currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the auto space are AutoZone, Inc. (NYSE:AZO) , Advance Auto Parts, Inc. (NYSE:AAP) and Cummins Inc. (NYSE:CMI) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AutoZone has an expected long-term growth rate of 12.2%. Over the past three months, shares of the company have gained 8.1%.

Advance Auto has an expected long-term growth rate of 12.3%. Shares of the company have increased 16.9% over the past three months.

Cummins has an expected long-term growth rate of 12%. Shares of the company have rallied 4.7% over the past three months.

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