Johnson Controls to Buy York International

The deal nets York shareholders a 35% premium.
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Johnson Controls

(JCI) - Get Report

plans to purchase heating and cooling equipment maker

York International

(YRK)

in a deal worth about $3.2 billion.

Johnson Controls said in a news release late Wednesday that adding York, with estimated sales of nearly $5 billion, would increase its rate of growth in the $200 billion industry for global building environments.

Johnson Chairman and Chief Executive John M. Barth said in a prepared statement: "The transaction will enable us to become a single source of integrated products and services that building owners want in order to optimize comfort and energy efficiency. With the addition of York, we will have enhanced HVAC&R, controls, fire and security capabilities. Bringing together our two organizations will also create the largest building services force in the world, strongly positioning us to capture an increased share of the fragmented $130 billion global services market for commercial buildings."

Under the agreement unanimously approved by both companies' boards, Johnson Controls will acquire York in an all-cash transaction in which York shareholders will receive $56.50 for each outstanding common share. The acquisition price also includes the assumption of some $800 million of York debt. Johnson Controls expects to finance the transaction with short- and long-term borrowings.

Shares of York closed Wednesday at $41.75; giving the buyout price a premium of more than 35% to York shareholders.Johnson expects the transaction to "modestly" add to earnings per share in fiscal 2006. More than $275 million of annual synergies, primarily related to cost efficiencies and a lower effective tax rate, are anticipated to be achieved by 2008.

Johnson anticipates the transaction will close in December 2005, subject to customary closing conditions that include regulatory approvals and York shareholder approval. York's board has unanimously recommended that York shareholders vote in favor of the transaction at a shareholders' meeting that will be scheduled as soon as practicable.