York to be purchased for $2.4 billion

Johnson Controls OKs deal for Pa. company

August 25, 2005|By BLOOMBERG NEWS

Johnson Controls Inc., the world's largest vehicle-seat maker, agreed to buy York International Corp. for $2.4 billion, expanding its building-related business and reducing its reliance on carmakers that are cutting production.

York stockholders will get $56.50 a share in cash, Milwaukee-based Johnson Controls said in a statement yesterday. That's a premium of 35 percent to York's closing price of $41.75. Johnson Controls said it also will assume $800 million of York debt.

Johnson Controls said it's adding about $5 billion in annual sales from York, the third-largest U.S. maker of heaters and air conditioners. Johnson Controls got $6.1 billion, or 23 percent, of its sales in the past fiscal year from its business that sells and services building temperature and lighting controls. Its auto-parts business had $20.5 billion in revenue.

"When you look at the overall company, it gives us a lot more balance," Johnson Controls Chief Executive John Barth said of the purchase in an interview. "It gives us significant growth opportunities."

Buying York, which is based in York, Pa., will expand Johnson Controls from installing and servicing equipment such as heating, cooling, lighting, security and fire systems to producing such equipment.

Equipment making has generated "low returns" for York in recent years, S&P analyst Martin King said in a statement.

Barth said the acquisition will better position Johnson Controls to capture more market share in what he said is a $130 billion global services market for commercial buildings.

The companies began discussing the transaction three or four months ago after "we knocked on their door," Barth said.

Johnson Controls has about 120,000 employees, 300 manufacturing plants and 330 controls sales and service offices. York has 24,000 workers and 26 factories.

Barth wouldn't comment on how many positions might be eliminated. "It's too early to talk about jobs," he said.

York shares rose 91 cents to close at $41.75 in New York Stock Exchange composite trading, before the transaction was announced. The shares climbed 32 percent to $55.20 in after-hours trading last evening. Johnson Controls shares fell 18 cents to close at $56.77 on the NYSE.

Spokeswoman Monica Levy said this will be Johnson Controls' largest acquisition. The company said it expects the purchase to be completed in December and to add to earnings in fiscal 2006, with $275 million in lower costs and tax savings by 2008.

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