Johnson Controls Examines Sale of Auto ElectronicsDavid Welch and Mark Clothier
Johnson Controls Inc., the largest U.S. auto-parts maker, said it’s exploring the sale of its automotive electronics unit.
The company retained JPMorgan Chase & Co. to assist in the potential sale, which is in its preliminary stages, Milwaukee-based Johnson Controls said today in a statement. The company said it wouldn’t comment further.
The assets may fetch more than $1 billion, said two people familiar with the matter. Johnson Controls, whose market value tops $20 billion, is exploring a sale to free up cash and focus on more profitable divisions, such as car seats, said one of the people, who asked not to be identified because Johnson Controls hadn’t yet made an announcement.
Johnson Controls shares climbed 2.6 percent to $32.63 at the close in New York, the biggest one-day gain since Jan. 2. The shares have risen 6.4 percent this year after falling 1.9 percent last year. The Standard & Poor’s 500 Index has increased
8.1 percent this year.
The electronics unit made about $1.4 billion of Johnson Controls’s revenue last year, selling infotainment systems, instrument clusters and electronics that control door locks and monitor tire pressure, according to a company presentation to analysts in December.
A valuation of about $1.3 billion for the assets, or about 10 times earnings before interest and taxes, is a good starting point, according to Peter Nesvold, a New York-based analyst for Jefferies Group Inc.
Johnson Controls got 51 percent of its $42 billion in revenue in fiscal 2012 from its auto parts unit. The company also makes auto batteries and equipment for managing building climates and security.