In Irving, Texas, Johnson Controls International plc recently finalized a multi-billion deal with Bosch, selling off some of its HVAC assets. Despite the headline-grabbing nature of the deal, the complexity and significant tax implications have muted market reaction to the news, with shares showing only a slight negative response.

This move comes after Johnson Controls refocused its business in 2018, divesting its Power Solutions segment for $13 billion to Brookfield. This reshaping left the company concentrating on building technologies and HVAC solutions, with $25 billion in sales generated post-pandemic, mostly from a $16 billion Building Solutions division heavily oriented in North America.

Looking ahead, the company aims for organic sales growth in the mid-single digits for 2024, following a 3% uptick in fourth-quarter sales that led to a boost in adjusted earnings to $3.65-$3.80 per share. However, challenges arose in the first quarter with a 1% decline in organic sales, partly due to a cyber incident and weak Chinese sales, posing risks to the full-year guidance.

In a recent development, Johnson Controls announced the sale of its residential and light commercial HVAC business to Bosch, valuing the transaction at $8.7 billion, with Johnson’s share at $6.7 billion. The deal includes the North American Ducted business and a Residential joint-venture with Hitachi. While the North American Ducted business is priced near 17 times EBITDA, the Air Conditions venture is valued at 7.5 times EBITDA, raising questions about the deal’s overall impact.

The sale is expected to significantly affect Johnson Controls’ revenue, as the Ducted business alone generates $4.5 billion in sales. Despite the potential benefits of reduced leverage and improved capital allocation, concerns linger about the deal’s dilutive effect on the company’s shares and the structure’s long-term viability.

Taking a cautious approach, investors are closely monitoring how this divestment will shape Johnson Controls’ trajectory in the upcoming quarters. The intricate details of the deal and its broader implications will likely influence market sentiment and shareholder decisions in the near future.