By Ludwig Burger and Shivani Tanna
(Reuters) -Robert Bosch has agreed to acquire Johnson Controls (NYSE:JCI)' and Hitachi (OTC:HTHIY)'s residential ventilation businesses for $8 billion, it said on Tuesday, in what will be the German engineering group's largest takeover to date.
Bosch said Johnson's heating, ventilation and air conditioning (HVAC) business for residential and small commercial applications would strengthen its Bosch Home Comfort arm, boosting the division's sales to 9 billion euros ($9.8 billion) from 5 billion euros currently.
Johnson Controls International (JCI) said separately that it stands to receive $6.7 billion in cash from the transaction.
Bosch said the addition would strengthen its presence in the United States and Asia, including sales of heat pumps as the company looks to capitalise on global efforts to reduce oil and gas heating to cut greenhouse gases.
The sale of the JCI assets includes its North America ducted business and a joint venture with Japanese group Hitachi, which holds a 40% stake.
Bosch said it expects the global market for the heating and cooling of buildings to grow 40% by 2030, driven by technological progress, the fight against climate change and new regulations.
The deal will be funded through cash on their balance sheet, the company added.
JCI said the transaction includes ductless HVAC production sites in Shimizu, Japan, which Hitachi will acquire.
Bosch CEO Stefan Hartung has said the company was looking at bigger, potentially global, acquisition targets and that the group was open to listing some of its divisions on the stock market.
Reuters reported last month that Bosch was weighing a bid for U.S. appliances manufacturer Whirlpool (NYSE:WHR). Bosch is no longer pursuing such a deal with Whirlpool after deeming the agreement with Johnson Controls and Hitachi more attractive, according to people familiar with the matter who requested anonymity because the deliberations are confidential.
Hartung declined to comment on Whirlpool on Tuesday but said that the Johnson-Hitachi deal would keep the company busy for 12 months.
Bosch, which had revenue of about 92 billion euros last year, also makes car parts, factory gear, power tools and home appliances.
As part of the deal, Johnson Controls' North America ducted business was valued at a multiple of 16.7 times its 2023 earnings before interest, taxes, depreciation and amortization (EBITDA), the company said. Its stake in the air-conditioning joint-venture with Hitachi was valued at a multiple of 7.5 times its 2023 EBITDA.
After tax, Johnson Controls is expected to receive net proceeds of about $5 billion for the deal.
Lennox International (NYSE:LII) and Samsung Electronics (KS:005930) were among suitors competing against Bosch for the Johnson Controls assets, people familiar with the matter told Reuters in March.
Centerview Partners and Citi acted as Johnson Controls' financial advisers while Simpson Thacher served as its legal adviser. Perella Weinberg Partners and Sullivan & Cromwell advised Bosch.
($1 = 0.9194 euros)