Dive Brief:
- Johnson Controls has reached a definitive agreement to sell its residential and light commercial HVAC business to Bosch Group, the company announced Tuesday.
- The deal, valued at $8.1 billion, includes a roughly $6.7 billion consideration for Johnson Controls’ North America Ducted business and 60% stake of a global residential joint venture with Hitachi, according to a new release.
- The all-cash transaction represents a significant portion of Johnson Controls’ previously announced strategic evaluation of non-core product lines, per the release. The sale will help Johnson Controls simplify its portfolio to focus on providing “comprehensive solutions for commercial buildings,” the company said.
Dive Insight:
The R&LC HVAC business, reported in Johnson Controls’ Global Products segment, engineers and manufactures ducted and ductless HVAC equipment and components for residential and light commercial applications. The business generated approximately $4.5 billion in consolidated revenue in fiscal year 2023, and will continue to provide products under the York, Hitachi, Coleman, Champion, Luxaire, Guardian, Evcon and TempMaster brands, the company said.
Johnson Controls’ interest in selling the business was first reported in March, with Reuters naming Bosch, Lennox International and Samsung Electronics as potential buyers at the time. Last month, Bloomberg reported that Hitachi was considering offloading its 40% stake in the Johnson Controls-Hitachi Air Conditioning joint venture.
As part of the transaction, Bosch plans to acquire 100% of the joint venture, including Hitachi’s 40% stake, it said in a separate news release Tuesday.
The sale is slated to wrap in approximately 12 months, Johnson Controls said.
The transaction follows Johnson Controls’ agreement to sell its Air Distribution Technologies business to Los Angeles-based private equity firm Truelink Capital earlier this month. This deal, expected to close by year-end, includes air distribution and movement brands Koch Filter, Titus, Ruskin, Krueger, PennBarry and Tuttle & Bailey, the company said.
The Air Distribution Technologies sale is part of the company’s transition toward a more simplified business focused on commercial building solutions, Johnson Controls Chairman and CEO George Oliver said in a statement.
In addition to paring back its ownership of non-core product businesses, Johnson Controls also announced the creation of a new data center-focused organization, Global Data Center Solutions, in June.
The organization will focus on operationalizing Johnson Controls’ scale to provide integrated solutions to data center customers around the world. The company has experienced strong sales and revenue growth due to the massive surge in the segment, with data center orders in the first fiscal half of 2024 surpassing last year’s totals, Oliver said on a May 2 earnings call.
"Johnson Controls is already benefiting from our transformation, which enables the unparalleled value proposition we provide to customers, and exposure to rapidly accelerating demand in the data center market and other key macro-economic tailwinds,” Oliver said in a statement Tuesday.
Even before the transaction, Johnson Controls’ applied HVAC and controls segment made up 40% of 2023 fiscal year sales, including large commercial applied HVAC equipment, building management systems and controls, according to the company’s fiscal year 2024 second quarter earnings. The company is expected to report its earnings for the third quarter of its 2024 fiscal year on July 31.
Meanwhile, Bosch has said the transaction will expand its presence in the U.S. and Asia. Bosch noted that it expects its Bosch Home Comfort Group sales revenue to increase to 9 billion euros from roughly 5 billion euros in 2023.
