Market Overview

Does Johnson Controls-Tyco Combo Make Sense? Analysts React

Does Johnson Controls-Tyco Combo Make Sense? Analysts React
Related JCI
Auto Stock Roundup: GM, Honda, Tesla And More
Earnings Scheduled For May 1, 2018
Bloomberg: Johnson Controls Power Unit Draws Interest (Seeking Alpha)
Related TYC
Earnings Scheduled For July 29, 2016
Tyco Expects Johnson Controls Merger To Close on September 2

Johnson Controls Inc (NYSE: JCI) and Tyco International plc (Ireland) Ordinary Shares (NYSE: TYC) recently agreed to merge in a $14 billion dollar deal with Johnson Controls owning 56 percent of the new company.

The deal is expected to provide significant tax benefits to shareholders and is being called another “corporate inversion.” Following the announcement, analysts from Robert Baird, Bernstein and UBS gave their opinion of the deal.

Robert Baird: Outperform Rating, PT Of $51

David Leiker and Adam Schmitz, analysts at Robert Baird, wrote, “Cost/tax synergies from the merger drive another $5 upside (to stock price) [...] Our recommendation of Johnson Controls is supported by mid-teens EPS growth on organic margin drivers.”

Related Link: Johnson Controls To Acquire Tyco, Despite Market Turbulence

Going forward, analysts are questioning the overlap of Tyco’s commercial focused business and Johnson Controls’ industrial focused businesses with regard to potential revenue and cost synergies. Baird notes that Johnson has had a good track record of integrating past acquisitions, which could materialize in this situation as well.

Bernstein: Outperform Rating, PT Of $41

Steven Winoker, an analyst at Bernstein, wrote, “We like the business combination, starting synergies and upside. We do not like the ‘price paid’ to Tyco shareholders [...] In the near term, we see deal mechanics occupying much of the air-time and over time, the business logic and upside crystallizing.”

UBS: Neutral Rating, Raised PT To $34

Shannon O’Callaghan, an analyst at UBS, wrote, “The deal seems to achieve JCI’s goal of becoming a multi-industry company and Tyco’s expanded market ambitions beyond fire and security [...] The cost synergies appear achievable as the extensive branch networks of both companies suggest the ability to consolidate and optimize branches, vehicle fleets, and back office.”

At The TIme Of This Publication

  • Johnson Controls Inc was seen trading at $34.41, up 0.58 percent.
  • Tyco International was seen trading at $33.70 down 1.35 percent.

    Image Credit: Public Domain

  • Latest Ratings for JCI

    Apr 2018RBC CapitalDowngradesSector PerformUnderperform
    Feb 2018BarclaysInitiates Coverage OnEqual-Weight
    Jan 2018UBSInitiates Coverage OnBuy

    View More Analyst Ratings for JCI
    View the Latest Analyst Ratings

    Posted-In: Analyst Color News Downgrades Price Target Reiteration M&A Analyst Ratings Tech


    Related Articles (JCI + TYC)

    View Comments and Join the Discussion!