Tyco And Johnson Controls To Merge

Tyco And Johnson Controls To Merge No word on the impact on local jobs

+ click to enlarge News staff photo by DONEEN DURLING Changes may be in store at the Tyco Simplex Grinnell building in Westminster, though a company spokesman says it’s too early to tell what impact the merger with Johnson Controls will have on any one location or jobs in general. Doneen Durling News Correspondent  WESTMINSTER  It is hard to tell what the effect may be on the local industry after news was released Jan. 25 that Tyco will merge with Milwaukee-based Johnson Controls, and company officials are saying it’s too early to say. Johnson Controls plans to buy Tyco for $16.5 billion. The companies released the news that they have entered into a definitive merger agreement under which Johnson Controls will combine with Tyco, a global fire and security provider, to create a leader in building products and technology, integrated solutions and energy storage. The merged companies will go under the name Johnson Controls. The completion of the transaction, which is expected by the end of the fiscal 2016 (September), is subject to regulatory approvals and approval by the shareholders. Chris Woodcock, director and marketing communications of the Westminster-based Tyco Simplex Grinnell said, “At this stage, it’s too early to know if there will be any effects on Tyco business units, locations, functions or specific employee positions. I would say that employees are excited about bringing together the strengths and complementary capabilities of two great industry-leading businesses, and being part of a global leader in building products and technology, integrated solutions and energy storage.” Under the terms of the agreement, Johnson Controls shareholders will own 56 percent of the equity of the combined company and receive $3.9 billion. Current Tyco shareholders will own 44 percent of the equity of the combined company. According to the press release, the companies will shed $500 million in costs over the first three years and expects to save $150 million annually in taxes through the inversion. Tyco was ahead of many big U.S. industrial companies in seeking tax relief by moving its legal residence offshore. The company moved its headquarters to Bermuda from Exeter, New Hampshire, in 2007, then to Switzerland in 2009, and to Cork, Ireland, in 2014. Johnson Controls’ merger with the Cork-based Tyco will formally make the move an inversion and Johnson Controls will be headquartered in Ireland. According to Reuters, Tyco said in 2014 that its move to Cork was tax-neutral. “The combination of Tyco and Johnson Controls is a highly strategic, value enhancing, step that brings together the unique strengths of two great companies to deliver best in class building technologies and services to customers around the world,” said George R. Oliver, chief executive officer Tyco. “We believe this transaction will allow us to better capture opportunities created by increased connectivity in homes, buildings, and cities. Joining forces with Johnson Controls pairs our leading established businesses with robust innovation pipelines and extensive global footprints to deliver greater value to customers, shareholders and employees of both companies.” Johnson Controls will get 70 percent of its revenue from physical products and 30 percent from services. Geographically, 56 percent of its business will come from the Americas, 24 percent from Asia, 21 percent from Europe, the Middle East, and Africa combined. According to Trent Gillies High Five on CNBC, nearly 50 U.S. companies have used inversions to reincorporate overseas during the past 10 years, which is more than in the previous two decades combined. Corporate tax rates in the U.S. can reach as high as 39 percent while Ireland’s tax rate is a modest plus or minus 14 percent. Because of deductions and loopholes in the States, few companies actually pay 39 percent. The move by the two companies has set off a spark during the political caucuses. Hillary Clinton stating that if elected, she would encourage an “exit tax.” While campaigning in Iowa, Clinton said that Johnson Controls begged the administration and Congress to bail out the auto industry. “And the auto industry, the suppliers, the jobs, were saved. OK. But just in the last few days Johnson Controls announces it’s going to pretend to sell itself to a company in Europe to escape paying taxes to the United States government. It’s called an IN-version. I think it should be called a PER-version,” said Clinton. Bernie Sanders also weighed in on the merger during the campaign. “These corporate inversions must stop. My message to these corporate deserters is simple: You can’t be an American company only when you want corporate welfare from American taxpayers or you want lucrative contracts from the federal government. If you want the advantages of being an American company, then you can’t run away from America to avoid paying taxes.” According to economist Kim Clausing, U.S. Treasury revenue loss from international tax planning grew from about zero in 1992 to well over $77 billion in 2012.