Johnson Holdings will move its headquarters out of the U.S. in a merger with Ireland-based Tyco, the companies announced Monday.
The deal will reap tax benefits for the combined company, making it the latest in a wave of corporate “inversions” that have worried the Obama administration and Congress.
By combining, Johnson Holdings, an energy management and efficiency company, and Tyco, a security systems business, will reap $150 million in “tax synergies,” they said.
The companies expect the tax benefits to be exceeded by the advantages of “operational synergies.” Tyco CEO George Oliver said the combined company “will allow us to better capture opportunities created by increased connectivity in homes, buildings and cities.”
Under the agreement, Johnson Controls shareholders would own 56 percent of the newly combined company, which would be called “Johnson Controls plc.”
As of Monday, Johnson Controls was valued at $22.6 billion. The company will maintain operational headquarters in Milwaukee, where it has been based.
A rash of inversions and foreign takeovers of U.S. companies has worried lawmakers concerned that it could undermine the U.S. tax base. Top tax-writers in the House and Senate last year searched for common ground on a deal to reform the system of international taxation, which is thought to incentivize domestic companies to move their headquarters overseas to low-tax jurisdictions such as Ireland. Meanwhile, the Obama Treasury Department has sought to tighten the tax rules around companies that try to lower their tax bills by leaving the country.
In a statement issued in response to the news Monday, Sen. Ron Wyden, D-Ore., the ranking Democrat on the Senate Finance Committee, warned that “U.S. businesses are continuing to defect to Ireland, stranding honest taxpayers. Congress needs to act now.”
Tyco itself has undergone tax-driven maneuvers in the past. It was one of the earliest U.S. companies to pursue an inversion, moving its headquarters from New Jersey to Bermuda.
