Johnson Controls Buys York International in All-Cash Transaction

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Late last month, Johnson Controls, Incorporated (NYSE:JCI)(Milwaukee, Wisconsin) announced its intention to buy York International Corporation (NYSE:YRK)(York, Pennsylvania) for a total of about $3.2 billion. The sale, which should be complete by September 30, 2005, and should close in December, pending shareholder and regulatory approvals, is expected to boost JCI’s sales for 2005 to $28 billion.

Johnson Controls is composed of four primary business units. The Automotive Seating and Interior Systems units, which operate 260 manufacturing plants worldwide with 76,000 employees, accounting for 70% of JCI’s sales in 2004, and are expected to account for 59% of sales in fiscal year 2005. The Facility Management and Control Systems group is expected to account for 32% of total sales for 2005, which is up from 2004, when the Control Systems group accounted for 21% of JCI’s sales. The Plastic Packaging and Batteries unit produced 9% of total sales in 2004, and that is not expected to change in 2005. Battery manufacturers have taken a beating in the last year, thanks to rapidly escalating plastics and lead costs. JCI is the world’s largest supplier of lead-acid automotive batteries. In July 2005, JCI acquired the battery unit of Delphi Automotive (NYSE:DPH) (Troy, Michigan). The previous year it had acquired the remaining 51% of a battery joint venture it owned with Mexican steel giant, Grupo IMSA (NYSE:IMSAY)(San Pedro Garza Garcia, Nuevo Leon, Mexico), which operated numerous plants in Mexico and Brazil.

The union of the two companies will expand the company’s share of the expanding $200 billion global building environments industry. JCI will become the largest global provider of building services, as well as a designer and purveyor of integrated controls and airconditioning and refrigeration equipment, thus maximizing lucrative synergies between the Facility Management and Control Systems units.

Johnson Controls’ Interior Systems group has recently announced that it is investing $118 million to retool operations in Battle Creek and Holland, Michigan, where it makes automotive armrests and interior door panels.

York, which employs 22,300 in 26 manufacturing plants worldwide and is the world’s largest independent manufacturer of HVAC and refrigeration equipment, has a 136,000 square-foot manufacturing facility in San Antonio, Texas, where it makes industrial-sized water-chiller airconditioning units, which will enable JCI to provide both facility maintenance services and equipment and controls to customers.

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