Johnson Controls Snaps Up Silent-Aire For $870M

Johnson Controls, a building technology and solutions company, has agreed to acquire Silent-Aire, a data center cooling and modular infrastructure solutions company for $870 million. This includes an upfront payment of $630 million and additional payments subject to achievement of certain milestones post the closing of the acquisition.

Johnson Controls (JCI) expects to close the acquisition in the fiscal third quarter of this year and expects the acquisition to be immediately accretive by increasing the company’s adjusted EPS from continuing operations in FY22 in the range of $0.07 to $0.09.

Johnson Controls chairman and CEO, George Oliver said, “With Silent-Aire, Johnson Controls has a significant opportunity to increase our focus on the data center vertical and accelerate growth in this attractive end market by combining the strengths of our global scale in manufacturing and service, with leading-edge innovation and a broad portfolio of technologies dedicated to serving hyperscale providers. This acquisition perfectly aligns with several of our key strategic growth initiatives and underscores our focus on creating shareholder value.”

JCI said that the migration of applications to the cloud had resulted in expansion of data center infrastructure that has resulted in “the development of hyperscale cloud and colocation facilities” and this is where Silent Aire could effectively provide an array of products. (See Johnson Controls stock analysis on TipRanks)

Following the acquisition announcement, Oppenheimer analyst Noah Kaye reiterated a Buy and a price target of $60 on the stock. Kaye said in a note to investors, “The acquisition, JCI’s largest to date since the Tyco merger, would position JCI for leadership in a high-growth vertical, with mix geared toward hyperscale and colocation data centers that are outgrowing the on-premise market with the COVID-19 pandemic accelerating the shift to cloud-native technology adoption.”

“We note Silent-Aire brings a portfolio of applied technology solutions such as direct evaporative cooling units (DECs) that are key enablers of data center sustainability/energy efficiency, which we view as increasingly critical for Fortune 100 technology companies leading the hyperscale data center buildout and could help position JCI closer to this vertical,” Kaye added.

Overall, the rest of the Street is cautiously optimistic on the stock with a Moderate Buy consensus rating based on 5 Buys and 5 Holds. The average analyst price target of $60.40 implies that JCI shares are fully priced at current levels.

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