Commercial real estate services company CBRE Group Inc. has agreed to acquire the Global WorkPlace Solutions business of Johnson Controls Inc. for $1.475 billion in cash, the two companies said on Tuesday.
Johnson Controls, who provides on-site staff for managing and maintaining commercial buildings, decided to sell its Global WorkPlace Solution unit, which manages 1.2bn sq ft of real estate in 55 countries to focus on higher-margin business lines with sales-growth potential.
The unit, which has nearly 16,000 employees generated about $4.1 billion in sales last year and had $95 million in operating profit. After the deal closes, GWS will operate as part of CBRE’s Global Corporate Services business, where revenue has been growing by 10% or more annually for the past decade as more major corporations and other institutions increasingly outsource their real estate services. CBRE will manage 5 billion square feet of real estate and corporate facilities, up from 3.8 billion square feet.
Los Angeles-based CBRE projects the deal will enhance revenue from its corporate services' business to $6.2 billion a year from $2.8 billion in 2014. The acquisition doesn’t include GWS joint ventures in Canada and Australia. The deal is expected to close during the fall.
Under the agreement, Johnson Controls will become the preferred provider for building automation, heating, ventilation and air conditioning for CBRE-managed properties. In addition CBRE and Johnson Controls also announced a 10-year strategic relationship, which is projected to generate $500 million a year in revenue for Johnson Controls.
CBRE will offer Milwaukee-based Johnson Controls integrated corporate real estate services that include project management, facilities management and transaction services, on more than 50 million square feet of property. And Johnson Controls for its part will provide a factory-direct relationship on HVAC equipment, building automation systems and related services to CBRE for its managed properties.
Besides that, the two companies also agreed to jointly fund an innovation lab that will develop services and technologies to reduce energy costs and enhance their clients’ work environments.
Last year, Johnson Controls hired Bank of America Merrill Lynch to relieve the workplace unit after deciding that the service business no longer suited the Johnson Controls' business portfolio. In 1989, Johnson Controls purchased the business from airline Pan Am Corp.
In 2014, the company announced the spinoff a majority of its automotive-interiors business to Chinese supplier Yanfeng Automotive Trim Systems Co. Currently Johnson Controls is awaiting for regulatory approval of a joint venture with Japan's Hitachi Ltd. to expand JCI's product lines in air conditioning and obtain greater access to Asian markets.