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Johnson Controls Shores Up Competitive Advantage

The Tyco merger and planned spin-off of its auto business should allow Johnson Controls to cut costs and become more profitable and less cyclical.


Brian Bernard: Johnson Controls merged with Tyco International on Sept. 2 and is expected to spin off its automotive seating business, Adient, to shareholders on Oct. 31. We believe these two transactions will result in a more profitable and less cyclical business, one with much less exposure to the volatility of the auto OEM market and more exposure to higher margin, recurring service revenue. 

We think Tyco's suite of security and fire-protection products and services complements Johnson Controls' HVAC and building automation business, and the combination should drive synergies and enhanced market penetration. We believe Johnson Controls will emerge from these transformative transactions as a true multi-industrial company, free from the stigma associated with automotive parts companies.

Brian Bernard does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.