Dive Brief:
- Johnson Controls has agreed to sell its Air Distribution Technologies business to Los Angeles-based private equity firm Truelink Capital.
- The deal, expected to close by the end of 2024, includes the air distribution and movement brands, Koch Filter, Titus, Ruskin, Krueger, PennBarry and Tuttle & Bailey, per a news release issued in late June. The transaction, however, does not include the Johnson Controls or Enviro-Tec brands, the company said.
- “The sale of our Air Distribution Technologies business is the next step as we continue to simplify our portfolio and advance our transformation into a comprehensive solutions provider for commercial buildings,” Johnson Controls Chairman and CEO George Oliver said in a statement.
Dive Insight:
Air Distribution Technologies’ product lines include grilles, registers and diffusers, terminal units, fire and smoke dampers, louvers, filters and fans manufactured at facilities in the U.S., Mexico, India, Thailand and the United Arab Emirates. These facilities will transfer to Truelink as part of the deal, Johnson Controls said.
News of the Air Distribution Technologies transaction comes amid a commercial and industrial HVAC boom fueled by the construction of large-scale data centers and manufacturing facilities, alongside Inflation Reduction Act incentives for building energy-efficiency upgrades.
Air Distribution Technologies’ customers are “mainly multifamily and commercial” businesses, a spokesperson for Johnson Controls said in an email.
In his statement, Oliver noted that the Air Distribution Technologies sale aligns with Johnson Controls’ strategy to channel its resources toward the “most attractive opportunities for value creation.”
Growth is particularly robust in the data center industry, which drove double-digit increases in Johnson Controls’ HVAC & controls segment to start its 2024 fiscal year.
In February, HVAC manufacturer Modine acquired Scott Springfield Manufacturing, a Canadian air handling manufacturing firm whose customer portfolio includes hyperscale and colocation data centers. Carrier, another major player in the HVAC market alongside Johnson Controls, sees an “opportunity of increasing this segment to well over 20% of our commercial HVAC sales in the next few years,” Carrier CEO David Gitlin said on the company’s Q1 2024 conference call in April.
Growth has been slower in the residential and light commercial HVAC segments. Major U.S. HVAC equipment manufacturers Carrier, Lennox and Trane Technologies all saw year-over-year revenue declines in those segments in the first quarter, according to their earnings reports.
Citing people familiar with the matter, Reuters reported in March that Johnson Controls had been “working with its advisers to sell its residential and light commercial businesses, including a U.S. business and a 60% stake in an air-conditioning venture with Japan's Hitachi.”
Robert Bosch GmbH, Lennox International and Samsung Electronics were among the firms competing to purchase the assets, worth over $6 million, according to Reuters.
Bloomberg reported last month that Hitachi was considering offloading its 40% stake in the joint venture, Johnson Controls-Hitachi Air Conditioning.
“We constantly evaluate ways to improve our business and serve our customers better; however, we don't comment on rumor or market speculation,” the Johnson Controls spokesperson said, commenting on the Reuters and Bloomberg reports.
Air Distribution Technologies’ new owner sees opportunities to grow the business.
“Our objective will be to expand the business through partnership with management in driving substantial commercial and operational improvements to strengthen Air Distribution Technology's market-leading position and better serve their customers,” Todd Golditch, managing partner and co-founder of Truelink, said in a statement.
