JCI Closes HomeLink Sale to Gentex

Zacks

Johnson Controls Inc. (JCI) completed the divestiture of its HomeLink business to Zeeland, MI-based Gentex Corp. (GNTX). Johnson had announced its intentions of selling the entire automotive electronics business earlier this year, following which, the sale of HomeLink business was announced in July.

HomeLink is a vehicle-based control system, which helps drivers to trigger garage door openers, entry door locks, home lighting, security systems, entry gates, and other radio frequency convenience products from a distance. Gentex’s automatic-dimming rearview mirrors have been using the HomeLink system for about 10 years.

The purchase consideration, including adjustments of all HomeLink assets, intellectual property and testing facilities, amounted to $700 million.

Johnson Controls’ plan of  selling the rest of its automotive electronics business is progressing well, with a high interest from many strategic buyers. The company expects that it will complete the bid of selling the process by the end of 2013.

Johnson Controls posted a roughly 18% rise in profits to $535 million or 78 cents per share in the third quarter of its fiscal year ended June 30, 2013 from $455 million or 66 cents in the comparable quarter of prior year, all excluding non-recurring items. With this, earnings per share beat the Zacks Consensus Estimate as well as the management’s own expectation by 3 cents.

Johnson Controls believes that double-digit rise in segment income in all three businesses and quarter-over-quarter improvements in earnings in the company’s automotive business in Europe are the main factors behind earnings growth in the quarter.

Revenues in the quarter rose 2% to $10.8 billion during the quarter. However, it missed the Zacks Consensus Estimate of $11.0 billion.

Johnson Controls is a supplier of automotive interiors, batteries and other control equipment. Gentex Corporation is a supplier of high-quality products to the worldwide automotive industry and North American fire protection market. The company develops proprietary electro-optic products. Currently, both Johnson Controls and Gentex retain a Zacks Rank #3 (Hold).

Other stocks that are performing well in the industry where JCI operates include Fuel Systems Solutions, Inc. (FSYS), and American Axle & Manufacturing Holdings Inc. (AXL). Both the companies carry a Zacks Rank #1 (Strong Buy).

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