Brookfield Business Partners L.P., together with institutional partners and Caisse de dépôt et placement du Québec (CDPQ), have reached an agreement whereby Brookfield and CDPQ will acquire 100 percent of Johnson Controls’ Power Solutions business for approximately $13.2 billion.
The business produces batteries for global automakers and aftermarket distributors and retailers for use in nearly all types of vehicles, including hybrid and electrical models.
“We are excited to grow our business with the acquisition of Power Solutions, a global market leader which generates consistent cash flows and profitability,” said Cyrus Madon, CEO, Brookfield Business Partners. “We look forward to partnering with the management team to continue growing this world-class business and build on its track record of innovation.”
“We are very pleased to partner with Brookfield, that shares our vision of value creation through long-term commitment,” added Stéphane Etroy, executive vice president and head of private equity at CDPQ. “This transaction enables us to acquire not only the world leader in automotive batteries, but also a model in terms of environmental and health and safety measures, that runs one of the most efficient industrial recycling systems globally.”
The business is a market leader in automotive batteries, with significant global reach and market share in both original equipment manufacturers and aftermarket channels. It is well-positioned to benefit from growth in demand for advanced batteries in all vehicle powertrains, including electric vehicles.
JCI’s Power Solutions business generates stable cash flows driven by non-cyclical aftermarket sales which comprise approximately 75 percent of its profit. Its position as a low-cost producer in its core markets has enabled consistent growth through business cycles.
Power Solutions also holds long-term relationships with top-tier original equipment manufacturers and auto retailers globally, which are served by its more than 15,000 employees in more than 150 countries.
The transaction will be funded with approximately $3 billion of equity and approximately $10.2 billion of long-term debt financing.
Brookfield Business Partners expects to fund approximately 30 percent of the equity on closing from existing liquidity. CDPQ will commit to fund approximately 30 percent of the equity on closing, and the balance will be funded by other institutional partners. Prior to or following closing, a portion of Brookfield Business Partners’ commitment may be syndicated to other institutional investors.
Financing will be led by a syndicate of banks including Barclays, Credit Suisse, JPMorgan Chase, BofA Merrill Lynch, BMO Capital Markets, CIBC Capital Markets, Citigroup, Deutsche Bank, Goldman Sachs, HSBC, RBC Capital Markets, The Bank of Nova Scotia and TD Securities, who are each (other than Barclays) also acting as financial advisers to Brookfield.
Davis Polk & Wardwell LLP is acting as lead deal counsel to Brookfield. In addition, Baker McKenzie is providing non-U.S. legal advice, Cahill Gordon & Reindel LLP is providing compliance advice and Weil, Gotshal & Manges LLP is providing consortium advice to Brookfield. Kirkland & Ellis is acting as legal counsel to CDPQ.
Closing of the transaction remains subject to customary closing conditions including regulatory approvals. Closing is expected to occur by June 30, 2019.
