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US and Irish firms act on $16.5bn Tyco-Johnson Controls merger

Simpson Thacher & Bartlett, Wachtell, Lipton, Rosen & Katz, A&L Goodbody and Arthur Cox have all landed roles advising on the $16.5bn merger of industrial company Johnson Controls and security provider Tyco – a deal that will lower the new company’s tax bill.

The US maker of car batteries and heating equipment Johnson Controls will combine with Cork-based Tyco, with the merged companies’ headquarters to be based in Tyco’s homeland Ireland.

The combined company will be renamed Johnson Controls and will be domiciled in low-tax Ireland. The deal is expected to save the new company at least $150m in annual tax. The combination will be tax-free to Tyco shareholders and taxable to Johnson Controls shareholders.

Simpson Thacher represented Tyco International led by New York-based M&A partners Alan Klein and Elizabeth Cooper. Irish firm Arthur Cox also provided advice with corporate partner Stephen Ranalow leading alongside with corporate partners Maura McLaughlin and Geoff Moore, with Fintan Clancy on tax and Phil Cody on finance.

Skadden Arps represented Tyco’s lead financial adviser Lazard with corporate partners Eileen Nugent and Michael Chitwood acting. Citi provided the committed financing for the transaction and Goldman Sachs served as financial adviser for Tyco.

Wachtell and A&L Goodbody advised Johnson Controls, with Cleary Gottlieb Steen & Hamilton leading on competition aspects. Cleary’s antitrust team on the deal is led by Washington based partner Brian Byrne, and Brussels based partner Nicholas Levy. Centerview Partners served as lead financial adviser, with Barclays also advising.

Under the terms of the agreement, Johnson Controls shareholders will own approximately 56% of the equity of the combined company and receive aggregate cash consideration of approximately $3.9bn. Current Tyco shareholders will own approximately 44% of the equity of the combined company.

The transaction is expected to complete by the end of fiscal year 2016 subject conditions including regulatory approvals and consent from the shareholders of both companies.

By moving its headquarters to Cork, Johnson Controls becomes the latest US firm to exploit Ireland’s lower tax regime, in an inversion deal similar to last year’s planned Pfizer-Allergan deal. Firms to win mandates on that deal include Wachtell, Skadden, Arps, Slate, Meagher & Flom; and A&L Goodbody acting as Pfizer’s legal advisers, alongside Morgan Lewis and Clifford Chance. Debevoise & Plimpton acts for Pfizer’s financial advisers.

Allergan turned to Cleary Gottlieb Steen & Hamilton, Latham & Watkins and Arthur Cox for the deal.