Brookfield Business Partners in partnership with CDPQ to acquire Power Solutions business from Johnson Controls

Brookfield Business Partners L.P. (NYSE:BBU) (TSX:BBU.UN) ("Brookfield Business Partners") together with institutional partners (collectively, “Brookfield”) and Caisse de dépôt et placement du Québec (“CDPQ”), today announced that they have reached an agreement whereby Brookfield and CDPQ will acquire 100% of Johnson Controls’ Power Solutions business (“the Business”) for approximately US$13.2 billion. 

Business Overview

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.

Highlights:

Market Leading Business with Strong Competitive Position. The Business is the 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. 

Durable Business with Stable Cash Flows. The Business generates stable cash flows driven by non-cyclical aftermarket sales which comprise approximately 75% of its profit.  Its position as a low-cost producer in its core markets has enabled consistent growth through business cycles.

Long-Standing Relationships with Diverse Customer Base.  The Business 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 150+ countries.

Reputation for Safety, Product Quality, and Performance. Through its 100+ year history, the Business has earned a reputation for strong environmental health and safety standards, including a differentiated closed loop recycling program, and best-in-class product quality and distribution, supporting improved performance and reliability for its customers.

Funding

The transaction will be funded with approximately US$3 billion of equity and approximately US$10.2 billion of long-term debt financing.

Brookfield Business Partners expects to fund approximately 30% of the equity on closing from existing liquidity. CDPQ will commit to fund approximately 30% 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. 

Advisors

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 advisors to Brookfield.

Davis Polk & Wardwell LLP is acting as lead deal counsel to Brookfield.  In addition, Baker McKenzie is providing non-US 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.

Transaction Process

Closing of the transaction remains subject to customary closing conditions including regulatory approvals. Closing is expected to occur by June 30, 2019.