(Bloomberg) -- Robert Bosch GmbH plans to buy Johnson Controls International Plc’s heating and ventilation assets for $8 billion, the German company’s biggest deal ever as it diversifies away from automotive supplies.
As part of the deal, Bosch will acquire full ownership of Johnson Controls’ air-conditioning joint venture with Hitachi, including the Japanese manufacturer’s 40% stake, Bosch said Tuesday. All parties have signed binding agreements, and the deal is expected to close in 12 months, subject to regulatory approval.
The transaction helps Bosch tap into new markets aside and expand away from its automotive business as carmakers shift to electric vehicles. The German company had competed against other suitors for the assets and recently emerged as the frontrunner, Bloomberg reported last week.
The deal will nearly double Bosch’s home comfort business to €9 billion ($9.8 billion) from €5 billion in sales, the company said. It includes 16 production sites and 12 development sites in more than 30 countries.
“With this acquisition, we will achieve a globally leading position in the promising market for heating, ventilation and air conditioning,” Bosch Chief Executive Officer Stefan Hartung said in a press conference. “It also strengthens our presence in the US and Asia and we will achieve a better regional balance in our portfolio.”
Bosch assumes that the global market for heat pumps, ventilation and air conditioning systems will grow by 40% until 2030, led by 50% growth in the US and about 30% in Europe. The growing market requires increasingly large investments: In 2023, US air conditioner maker Carrier Global Corp paid €12 billion to take over most of German family-owned Viessmann to expand its heating and cooling operations.
What Bloomberg Intelligence Says:
Johnson Controls’ pending sale of its Residential and Light Commercial (R&LC) HVAC assets to Bosch for $5 billion of net proceeds likely won’t affect its Baa2/BBB+ credit ratings, our analysis suggests, despite the majority of proceeds potentially being used for buybacks to offset dilution. Event risk remains possible, as Elliott Investment Management was reported to have built a meaningful stake in the industrial, yet the activist’s past practices have had limited impact on financial risk.
— Joel Levington, BI credit analyst
Bosch has secured long-running licenses for established brands like York and Coleman in the US and Hitachi in Asia. The company can finance the deal from its own means without adding debt, and it will “add positively to group-wide margins targets,” Hartung said.
Johnson Controls has been under pressure recently with activist investors Elliott Investment Management and Soroban Capital Partners independently building positions worth more than $1 billion in the company.
To reposition itself as a pure-play building solutions company, Johnson Controls agreed in June to sell its air distribution technologies business to private equity firm Truelink Capital. The same month, Johnson Controls announced it will create a unit to take advantage of increasing demand for data center solutions.
--With assistance from Kiel Porter.
(Updates with CEO comment in fifth paragraph.)
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