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Johnson Controls to Finalize Bidders for Sale of Power Unit

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Per Reuters, Johnson Controls International plc’s (JCI - Free Report) power solutions business will soon have two shortlisted bidders, as informed by banking sources. In order to back the company’s unit sales, these banks are working on a jumbo debt financing of more than $10 billion.

The buyout of Johnson Control’s power solutions unit, which manufactures advanced batteries for vehicles, is expected to generate approximately $12 billion. Additionally, this is expected to be one of the biggest buyouts of 2018.

The buyout is drawing attention of numerous top private equity firms. Per bankers, Apollo Global Management, Brookfield Asset Management and Onex Corp have been shortlisted for the deal. Clayton, Dubilier & Rice (CD&R) has also been named as a bidder. Potential buyers met the company management in July and second round bids were submitted on Sep 7.

Johnson Controls International plc Price and Consensus


Earlier, in March, Johnson Controls has announced that it is weighing on alternatives for the power solutions unit. Except for this, it functions through another segment i.e. building technologies & solutions.

In 2017, the company’s power solutions unit generated revenues of $7.3 billion, with 24% share in total revenues. However, developing advanced battery technology makes the business unit a capital-intensive one that requires a huge investment.

Prior to this, in October 2017, Johnson Controls sold its Scott Safety business to 3M Company, which generated net cash proceeds of $1.9 billion. Divesting non-core business units will enable the company to strengthen and invest in HVAC, fire and security solutions and integrated building management systems, with strong growth prospects. However, these divestitures are putting a toll on Johnson Controls’ revenues and profits due to high separation costs.

Price Performance

In the past six months, Johnson Controls’ stock has gained 2.3%, underperforming 4.6% increase 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 include PACCAR Inc. (PCAR - Free Report) , Allison Transmission Holdings, Inc. (ALSN - Free Report) and Fox Factory Holdings, Inc. (FOXF - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PACCAR has an expected long-term growth rate of 10.8%. Over the past six months, shares of the company have gained 6.8%.

Allison Transmission has an expected long-term growth rate of 10%. Shares of the company have increased 34% in the past six months.

Fox Factory has an expected long-term growth rate of 16.8%. Over the past six months, shares of the company have gained 81.9%.

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