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Johnson Controls sells its power business to Brookfield in $13 billion deal

Key Points
  • Johnson Controls International said on Tuesday it would sell its power solutions business, which makes car batteries, to investment firm Brookfield Business Partners L.P., in a cash deal valued at $13.2 billion.
  • Shares of Johnson Controls were up 3.5 percent at $35.40 before the bell.
An employee walks through the Johnson Controls Inc and Saft Groupe SA factory, a joint venture producing Lithium-ion batteries in Nersac, France.
Fabrice Dimier | Bloomberg | Getty Images

Johnson Controls International said on Tuesday it would sell its power solutions business, which makes car batteries, to investment firm Brookfield Business Partners, in a cash deal valued at $13.2 billion.

Shares of Johnson Controls were up 3.5 percent at $35.40 before the bell.

The deal will allow Johnson Controls to focus on its building technologies and solutions business, which makes heating, ventilation and air conditioning systems, as well as building access control and fire detection systems.

Reuters had reported, late last month, that Brookfield and Johnson Controls were close to finalizing terms for the sale of the unit, whose batteries are used in about a third of cars globally.

The deal represents the biggest shake-up at Johnson Controls since its merger in 2016 with Tyco International.

Johnson Controls' power solutions business, which makes and distributes about 154 million lead-acid batteries for passenger cars and light trucks annually, carries higher margins but has been capital intensive for Johnson Controls, analysts have said.

The company expects to deploy $3.0 to $3.5 billion of proceeds toward debt paydown and retain an investment grade credit rating, the company said in a statement.

More deals in the sector are likely, as industrial conglomerates continue to separate businesses that are too disparate in terms of financial performance.

The company expects the transaction to close by June 30, 2019.

Centerview Partners and Barclays were financial advisers to Johnson Controls, and Simpson Thacher served as legal advisers.

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Key Points
  • More than 92 percent of manufacturers surveyed say they had a positive outlook for their businesses in the third quarter, the latest National Association of Manufacturers survey says.
  • At that rate, 2018 would be the most optimistic year for manufacturers in the survey's history.