Japanese multinational engineering and electronics conglomerate Hitachi Ltd has inked a deal to form a global appliances joint venture with Johnson Controls which would give the American firm a majority stake in the business, it said on Thursday. Concurrently this would trigger an open offer for the Indian public listed appliances arm of Hitachi.
The transaction which is expected to close later this year, subject to regulatory approvals and satisfaction of other customary conditions.
As per the agreement, Johnson Controls will have a 60 per cent stake in Hitachi Appliances Inc. This deal would exclude sales and service operations in Japan. Hitachi Appliances will continue to provide Hitachi branded HVAC products in the Japanese market after the deal.
Hitachi Appliances had sales of $6.4 billion during FY14 and the unit being moved to the JV with Johnson Controls represented sales of over $2.6 billion.
With around 13,800 employees and 24 manufacturing plants, the Johnson Controls-Hitachi JV will build on both organisations' technology, research and development leadership. The management team will be headed by Franz Cerwinka, who has been with Johnson Controls for almost two decades.
“The worldwide HVAC market is continuing to grow steadily and the demand for energy efficient air conditioning systems with state-of-the-art technologies is expanding. As air conditioning systems are a key building block for building solutions, we believe this partnership will allow Hitachi and Johnson Controls to deliver the best solutions for our customers,” said Hiroaki Nakanishi, chairman & CEO, Hitachi Ltd.
"Furthermore, in addition to air conditioning systems, we will be able to provide other building solutions that will enhance efficiencies throughout buildings, as well as surrounding areas,” Nakanishi added.
“The joint venture will propel us forward with superior products, enabling Johnson Controls to deliver the most diverse technology portfolio in the industry to meet customer demands across the changing global marketplace," said Alex Molinaroli, chairman and chief executive officer, Johnson Controls.
Hitachi Appliances, a wholly-owned subsidiary of Hitachi, Ltd, supplies air conditioning solutions across the globe, from residential room air conditioners to variable refrigerant flow systems, and other air conditioning equipment for commercial and industrial use.
Johnson Controls, a global diversified technology and industrial leader, provides heating, ventilation, air-conditioning, building controls, refrigeration and security systems for buildings. It serves customers in more than 150 countries.
Hitachi owns close to 75 per cent stake in Hitachi Home & Life Solutions (India) Ltd. The deal would amount to a change in control of its holding firm and would trigger an open offer. The firm's share price rocketed 20 per cent to hit the upper circuit limit for the day at Rs 1,169.15 a share.
It currently has a market cap of around Rs 3,179 crore and it would cost Johnson Controls around Rs 953 crore to buy the remaining stake, and when it makes the tender offer. It would need to shell out at least Rs 500 crore to cross the delisting mark of 90 per cent.
(Edited by Joby Puthuparampil Johnson)