Johnson Controls Said to Mull Auto-Electronics Unit Breakup
Johnson Controls Inc. (JCI), the largest U.S. auto-parts maker, may consider breaking up its electronics unit and selling the pieces if it doesn’t get a strong enough bid for the business, people with knowledge of the matter said.
The Milwaukee-based company, which said in March it hired JPMorgan Chase & Co. to explore a sale of the division, may sell only parts of the business if it doesn’t get the right price for the unit, said the people, who asked not to be named because the process is private. At least one of the initial bidders, Delphi Automotive Plc (DLPH), has backed away from an offer because it didn’t want all of the business, the people said.
China’s SAIC Motor Corp. is still considering a bid for at least part of the automotive-electronics unit, valued at $1.2 billion, the people said. While a breakup may take more time, it could make it easier to find buyers, one person said. Johnson Controls would still prefer to sell the unit to one buyer, the people said.
Delphi, based in Troy, Michigan, eventually may be interested in parts of the business excluding the Homelink product line, which enables drivers to open automated garage doors with a control built into a car’s visor, said the people. Delphi made a first-round bid for the entire unit to get a look at what assets may fit in with its operations, people familiar with the situation said.
SAIC Motor, based in Shanghai, may be interested in the whole unit, said one of the people. It isn’t clear if SAIC Motor plans to make a firm offer for the business, the person said.
Delphi withdrew its interest more than a week ago and told Johnson Controls that if the company were to sell off parts in the future, Delphi may be willing to have a look at some assets, one of the people said.
JPMorgan is also talking to private-equity firms in search of more bids, said one of the people familiar with the situation. Previously, buyout firms were excluded from the process, people with knowledge of the matter said in April.
Fraser Engerman, a spokesman for Johnson Controls, said in an e-mail that the company has received “strong interest from multiple strategic buyers” and that the sale process is proceeding. Claudia Piccinin, a spokeswoman for Delphi, declined to comment. A spokeswoman for SAIC Motor in Shanghai didn’t respond to a message left outside normal business hours.
Johnson Controls got more than half of its $42 billion in revenue in the year ended in September from its auto-parts unit. The company also makes auto batteries and equipment for managing building climates and security.
The electronics unit accounted for about $1.4 billion of Johnson Controls’s revenue last year, according to a company presentation to analysts in December, about 3 percent of the total, selling infotainment systems, instrument clusters and electronics that control door locks and monitor tire pressure.
The stock dropped less than 1 percent to $37.49 as of 4 p.m. in New York, giving the company a market capitalization of almost $26 billion.
Reuters reported previously that Johnson Controls is in talks with private-equity firms about their interest in the unit.
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