Tyco International and Johnson Controls announced Monday they will merge in a tax-saving deal that combines Tyco's operations in security and fire safety with Johnson's businesses, which include energy storage. The merger will result in $150 million in annual tax savings as Johnson, based in the Midwestern state of Wisconsin, will shift its domicile for tax purposes to Ireland, where Tyco is based and where tax rates are lower.
Under the deal, Johnson shareholders will own 56 percent of the equity of the combined company and garner cash of $3.9 billion. Tyco shareholders will hold the remaining 44 percent.
The two companies said combining their products, which include fire and security systems, energy storage and building heating and cooling, will better serve industrial and commercial real estate clients.
"With its world-class fire and security businesses, Tyco aligns with and enhances the Johnson Controls buildings platform and further positions all of our businesses for global growth," said Alex Molinaroli, chief executive of Johnson Controls.
"Through this transaction, we will also expand our ability to further invest globally, develop new innovative solutions for customers and return capital to shareholders."
Johnson Controls had fiscal 2015 revenues of $37.2 billion, while Tyco's were $9.9 billion.
The two companies expect the deal to result in at least $500 million in cost savings over the first three years.
Molinaroli will serve as chief executive for 18 months after the closing of the deal, after which he will be succeeded by Tyco CEO George Oliver.
Johnson plans to spin off its automotive seating and interiors business into a new publicly traded company called Adient.