Johnson Controls To Undergo Corporate Inversion

Building systems giant Johnson Controls will become the latest American company to execute a corporate inversion in order to reduce its U.S. tax burden.

The Milwaukee-based company, which is spinning off its auto parts business in order to focus on heating and cooling systems and advanced batteries, will merge with fire safety and security company Tyco to form Johnson Controls plc.

Although Johnson Controls plans to maintain its operational headquarters in Wisconsin, the combined company will assume Tyco's official headquarters in Cork, Ireland.

Corporate inversions, under current U.S. law, allow merged American companies to transfer a portion of their shares to foreign entities in order to incorporate in lower-tax nations.

Ireland, in particular, became a top target for the highly controversial practice. Tyco, whose U.S. offices are in New Jersey, moved to Cork in 2014 after merging with its own Irish subsidiary.

Johnson Controls shareholders will receive about $3.9 billion in cash considerations and control 56 percent of the combined company. Tyco shareholders will own the remaining 44 percent.

The companies said that the merger would establish an industry leader in building systems and energy storage while cutting costs by $500 million over its first three years. The merged company will save at least $150 million in taxes each year, officials said.

"We believe this transaction will allow us to better capture opportunities created by increased connectivity in homes, buildings and cities," said Tyco CEO George Oliver, who will eventually lead the merged company.

The Obama administration attempted to curtail corporate inversions, but the Treasury Department argued that only Congress could end the practice altogether.

Democrats support a variety of measures to deter inversions, while Republicans believe that the country should instead make its corporate tax rates more competitive.