The US corporate tax saga continues. Milwaukee-based Johnson Controls has announced plans to merger with Tyco International Plc. The merger would move the company to low-tax Ireland, while creating a company with revenue of about $32 billion.
Milwaukee-based Johnson Controls, which has a market value $23 billion, makes heating and ventilation systems and car batteries, while Cork, Ireland-based Tyco, valued at $13 billion, specializes in fire protection systems.
When combined the company will save $150 million a year in tax by moving its home office to Tyco’s legal domicile, the companies said.
“The move would be consistent with Johnson Control’s strategy of transforming from an auto supplier into a multi-industry leader,” UBS analyst Colin Langan said in a client note.
Johnson Controls’ shares were down 0.8% at $35.30 in premarket trading, while Tyco’s were up 10% at $33.65.
Once approved Johnson Controls’ shareholders will own about 56% of the combined company and receive a cash consideration of approximately $3.9 billion.
The two companies expect to save about $500 million in the first three years of joint operation.
The new company will be called Johnson Controls Plc, and will be led by Johnson Controls Chief Executive Alex Molinaroli. It will continue to trade on the New York Stock Exchange.
The company’s could use a win. Shares of Johnson Controls have lost more than 25% of its value since the start of 2015, while Tyco’s shares have fallen by over 30%.