Johnson Controls Inc., seeking to reduce its reliance on the cyclical auto industry, agreed to acquire Canada Pension Plan Investment Board’s Air Distribution Technologies for $1.6 billion to add ventilation products.
Air Distribution Technologies is one of the largest independent providers of air-distribution and ventilation products for residential and industrial buildings in North America, with brands such as Ruskin, Titus, Hart & Cooley and Krueger, according to a statement today.
Johnson Controls, the largest U.S. auto-parts maker, is increasing its focus on its building-efficiency unit, which accounted for 34 percent of sales in fiscal 2013, compared with 51 percent from its auto unit. The Milwaukee-based company in January agreed to sell its automotive-electronics unit to Visteon Corp. and is considering options for its unprofitable auto-interiors unit, which makes door and instrument panels.
“We’re continuing to look at our alternatives there,” Chief Executive Officer Alex Molinaroli said today on a conference call with analysts.
Johnson Controls rose 1.7 percent to $46.74 at the close in New York. The shares have dropped 8.9 percent this year.
The company anticipates financing the transaction by issuing debt in its third quarter, probably through a “multipart” bond transaction in June, Chief Financial Officer Bruce McDonald said on the call.
Canada Pension is the nation’s largest retirement fund manager, overseeing about C$201.5 billion ($183.6 billion) for 18 million Canadians. The Toronto-based pension fund acquired Air Distribution Technologies from Tomkins, the London-based engineering firm, for $1.1 billion in 2012.
Canada Pension paid $500 million in equity for the air business at that time and financed the rest with debt, Linda Sims, a spokeswoman, said in an e-mail. The sale to Johnson Controls would double the pension manager’s invested capital, she said.
The Air Distribution Technologies acquisition is expected to close by the end of July. Johnson Controls received financial advice from Goldman Sachs Group Inc. and legal counsel from Cleary Gottlieb Steen & Hamilton.