- Johnson Controls' (NYSE:JCI) proposed inversion with Ireland-based Tyco International (TYC) likely will stay on track, analysts say, despite new Treasury Department rules that killed Pfizer's merger with Allergan.
- A major difference between the two deals is that the JCI-TYC hookup makes sense from a strategic point of view, regardless of tax benefits, according to Morningstar's David Whiston.
- The analyst also says TYC has not issued stock to make acquisitions during the past three years, and large deals amounted to only a “few hundred million dollars” paid all in cash, which means JCI shareholder’s position in the combined company would remain below the 60% threshold beyond which the Treasury Department’s treatment of the deal becomes less advantageous.
- Finally, the combined firm would have a post-merger tax rate of 16% rather than 19% for JCI in 2015, so Whiston sees the merger coming to fruition with JCI owning ~56% of the combined company.
- Now read Shareholders rewarded in Johnson Controls-Tyco merger