Johnson Controls agrees acquisition of Tyco International in tax inversion deal

US industrial conglomerate Johnson Controls and Ireland-headquartered rival Tyco International have agreed to merge, in what is viewed as a sign that US corporates have retained their appetite for large M&A deals despite volatility in global capital markets.

Although the deal's value was not confirmed, though earlier reports had pegged it at up to $20bn, it was announced that shareholders in Johnson Controls were to own roughly 56% of the new company.

One of the main motives behind the transaction for Johnson Controls was thought to be its desire to offset its exposure to the slowdown in China, both through its building solutions and automotive experience businesses.

Milwaukee-based Johnson Controls was also said to be interested in Tyco's know-how in the field of fire-protection to complement its own building efficiency unit.

As of the close of trading on 22 January, Tyco International sported a market capitalisation of $12.98bn.

The tie-up would also see the new merged company, to be named Johnson Controls Plc, move its tax domicile to Ireland, cutting the US government's tax-take in the process, in what was often referred to as a 'tax-inversion' deal.

Johnson Controls said the combination would allow it to save at least $150m in taxes and obtain at least another $500m in cost savings in the first three years following completion of the deal, which was expected to close by the end of 2016.

As of 13:05 shares in Johnson Controls were up 1.12% to $36 in pre-market trading, alongside gains of 6.24% to $32.5 in those of Tyco Intl.