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Johnson Controls Explores HVAC Asset Sale: List of Potential Buyers, Bidders Emerges

March 24, 2024 by Joe Panettieri

Johnson Controls International is exploring selling some of its HVAC (heating, ventilation and air conditioning) businesses for roughly $5 billion, Bloomberg News reported.

Update, March 23, 2024: Potential bidders may include Robert Bosch, Lennox International and Samsung Electronics, Reuters reported. Additional bidders may emerge and an actual deal may still be months away, Reuters added.

Update, January 30, 2024: In a prepared statement, Johnson Controls CEO George Oliver said: "As part of the continuous evaluation of our portfolio, we are in the early stages of pursuing strategic alternatives of our non-commercial businesses, in line with our objective to maximize value to our shareholders." The statement surfaced within Johnson Controls' Q1 2024 earnings release.

During the associated earnings call with Wall Street analysts, Oliver said the potential asset sale would represent less than 25% of Johnson Controls' business portfolio.

If a sale happens, "we'll continue to be able to do bolt-ons and supporting the technology and our go-to-market as we strengthen that across the globe. And our intent would be to make it accretive as far as whether it'd be through bolt-ons and/or deployment back to our shareholders to offset the dilution that any divestiture might have," Oliver told analysts.

Moreover, a potential consumer HVAC asset sale could allow Johnson Controls to focus even more sharply on OpenBlue, a software platform for "smart buildings that are secure, healthy and sustainable," Sustainable Tech Partner believes.

Is Johnson Controls Selling Off These HVAC Assets?

The potential asset sales could involve three areas of business, Bloomberg said, pointing to:

  1. Potentially selling off most of the York International business. Johnson Controls acquired York International for $2.4 billion in cash in 2005. Johnson also assumed $800 million of York's debt, which lifted the total 2005 deal valuation to $3.2 billion.
  2. Selling off its 60% stake in a joint venture the company has had with Hitachi since 2015. Hitachi has a first right of refusal for that potential deal.
  3. Selling off most of Air Distribution Technologies, which Johnson Controls acquired for $1.6 billion in 2014.

Sustainable Tech Partner has not independently confirmed whether Johnson Controls is exploring the potential sale of those specific assets.

Business Strategy: Smart Buildings and Software

Rewind to a December 2023 earnings call with Wall Street analysts. On that call, Oliver explained how the company was betting its business on smart building technologies that align with customers' energy efficiency, sustainability and decarbonization goals.

The strategy leans heavily on artificial intelligence (AI), Internet of Things (IoT) and cloud computing services that save energy and reduce emissions, while improving the overall building occupant experience, the company has emphasized.

Johnson Controls' data-gathering technology, known as OpenBlue, brings both IT and OT (operational technology) data together from across the building's ecosystem. The software can "break down silos" between third-party equipment, Oliver pointed out.

Moreover, the company will lean heavily on distributors and systems integrator partners to recommend, deploy and manage smart building solutions.

Note: Blog originally posted January 26, 2024. Updated regularly thereafter.

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