Johnson Controls International (JCI), the biggest western player in the global battery market has fuelled speculation that it could be preparing to sell its Power Solutions division— essentially all of its lead-acid and lithium business.
And sources have told BBB the most likely buyer will be a Chinese player— perhaps Camel or Chilwee (also known as Chaowei) who both have the financial muscle to pull off such a deal.
JCI confirmed it will “explore strategic alternatives” for Power Solutions over the next “several months”, but stopped short of listing its options.
However, in a thinly-veiled sales pitch, JCI’s chairman and CEO George Oliver, chairman and chief executive officer said: “Over the years our team has built Power Solutions into an incredible business with a high-margin aftermarket model that has delivered consistent growth through business cycles. According to a Reuters report, the battery business makes up just 24% of JCI’s revenues. The company’s main interests at present is in construction.
“These strong fundamentals, as well as recently issued provisions of US tax reform, will be taken into account as we review the alternatives and assess which option creates the best long-term results for the business and the most value for shareholders.”
Oliver, who took up his post last September, said the battery business “is the clear global leader in providing battery solutions to the automotive sector with an advantaged position in the aftermarket”.
Power Solutions— and its separate building management systems division management— “are navigating markedly different industry landscapes with unique strategic, financial and operational opportunities and requirements”, Oliver said. “Creating shareholder value is our top priority.”
However, JCI warned “there can be no assurances as to the form and timing of any transaction as a result of this strategic review, or if a transaction will be consummated”.
If a sale does go ahead, China is clearly a leading suitor— in addition to still being wedded to lead-acid it could easily offer a suitable ‘dowry’. JCI’s second global corporate headquarters, in Shanghai, opened only last year.
There are some 15,000 on the payroll of Power Solutions.
JCI said in 2016 it was betting heavily on its absorbent glass mat (AGM) batteries, which are more durable than conventional lead-acid batteries, with stop-start systems— and unveiled plans to spend $780 million by 2020 to expand global production of such batteries.
In fiscal 2017, Power Solutions generated $7.3 billion in revenue and $1.6 billion in earnings before interest, taxes, depreciation and amortisation.