Johnson Controls (Milwaukee, Wis.; www.johnsoncontrols.com) announced that it has signed a definitive agreement to sell its Scott Safety business to 3M Co. (St. Paul, Minn.; www.3m.com) in a cash transaction valued at approximately $2.0 billion.
Scott Safety is a leader in the design, manufacture and sale of high-performance respiratory protection, gas and flame detection, thermal imaging and other critical products for fire services, law enforcement, industrial, oil & gas, chemical, armed forces, and homeland defense end markets. The business is headquartered in Monroe, North Carolina, with approximately 1,500 employees globally.
“We are pleased to announce the sale of Scott Safety to 3M in a mutually beneficial strategic transaction,” said Alex Molinaroli, Johnson Controls chairman and CEO. “Consistent with our priority to focus the portfolio on our two core platforms of Buildings and Energy, we continue to execute on our strategic plan, which positions us to deliver a 12 percent to 15 percent earnings per share CAGR by fiscal 2020.”
On a trailing 12-month basis, Scott Safety generated sales of approximately $570 million and earnings before interest, taxes, depreciation and amortization (EBITDA) of approximately $155 million. Johnson Controls plans to offset dilution from this transaction, including increasing its share repurchase program during the remainder of fiscal 2017, and will provide additional details during the quarterly earnings call to be held in April.
“Scott Safety is a leader in the fire safety solutions market, with a strong management team and highly dedicated employees,” said George Oliver, Johnson Controls chief operating officer. “We thank them for their significant contributions over the years and believe this transaction positions them for long-term success at 3M.”
Net cash proceeds from the transaction are expected to approximate $1.8 to $1.9 billion, and will be used to repay a portion of Tyco International Holding Sarl’s $4.0 billion of merger related debt. The purchase price translates to approximately 13 times Scott Safety’s trailing 12-month EBITDA. The transaction is expected to close in the second half of calendar 2017, subject to customary closing conditions including required regulatory approval.