Johnson Controls (JCI) International and Bosch are looking at the same business and seeing entirely different things. To the $50 billion U.S. conglomerate, it’s selling residential heating and air conditioning operations that swing with the economic times and distract from more highly valued commercial customers. The German industrial giant envisions an exciting growth opportunity. This perception gap bodes poorly for Europe.

Bosch said on Tuesday it would buy two operations from Johnson Controls for $8.1 billion, including debt. About $4.6 billion relates to a North American unit whose machines circulate air through homes. The rest goes toward a similar international joint venture 40% owned by Japan’s Hitachi, which Bosch is taking over in full.

The Stuttgart-based manufacturer, which generated $99 billion of revenue last year, has bagged a good deal to add to its collection of household appliances, power tools and automotive parts. It’s getting the U.S.-focused assets for 16.7 times EBITDA in the fiscal year ending in September 2023, a small discount to comparable U.S. rivals, according to Visible Alpha data. At 7.5 times the same measure of profit, the Hitachi JV is being valued at far less than the average multiple of worldwide peers.

It probably helps that Bosch, owned by a charitable foundation, is an uncontroversial steward willing to take the whole bundle from Johnson Controls at once. Moreover, the seller’s shareholders will probably be satisfied, given that recent press reports indicated an even lower price tag. Their bigger concerns may be over Elliott Management’s presence and the fate of CEO George Oliver and the remaining parts.

What’s good for Bosch, however, isn’t necessarily good for the continent it calls home. Boss Stefan Hartung painted the company’s biggest-ever deal as a chance to boost the top line by strengthening its presence in the United States and Asia. It suggests the more dynamic U.S. economy, where capital spending has been helped by government subsidy programs such as the Inflation Reduction Act, holds greater appeal than Europe, where it generates half its revenue. Economic forecasts justify the assessment, with eurozone real GDP seen increasing by 0.9% this year compared to U.S. growth of 2.6%, according to the International Monetary Fund.

The broad takeaway is that one of Europe’s few industrial champions is investing heavily in the United States, despite the lack of clarity augured by a possible second Donald Trump presidency. If that doesn’t send a burst of cold air through Brussels, it’s hard to know what will.

Context News

German industrial group Bosch said on July 23 that it had agreed to buy heating, ventilation and air conditioning businesses from Johnson Controls International for $8.1 billion, including debt. Under terms of the deal, Bosch is valuing the North American residential business at 16.7 times EBITDA for the fiscal year to September 2023 and paying 7.5 times the equivalent measure of profit for a Johnson Controls joint venture with Japan’s Hitachi. Johnson Controls shares dipped 1%, to $69.47, as of 1338 GMT on July 23. Perella Weinberg is advising Bosch while Centerview and Citi are advising Johnson Controls.

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