What Will Be The Effect On The Segment Operating Margin As A Result Of The Johnson Controls-Tyco Merger?

by Trefis Team
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JCI
Johnson Controls
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Both Johnson Controls (NYSE:JCI) and Tyco in the past have shed their lower-margin businesses in order to focus on its building systems. While Tyco split into three units in 2012, spinning off the ADT security company and Pentair, a valve maker, Johnson Controls is in the midst of spinning off its Automotive Experience business, which makes car interiors. Similar to those deals, this agreement is being conducted to focus on the higher-margin businesses. While JCI will benefit financially as a result of lower taxes, from the inversion deal in which the tax base will be moved to Ireland, strategically the company will become a building controls behemoth, with the combination of JCI’s HVAC system and Tyco’s fire and security system. Tyco’s higher margins will be beneficial to JCI, and the combined company will be able to further improve margins in the future by bringing together the two groups’ technologies.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Johnson Controls.
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