JCI considers the merged entity, which will be the 14th largest industrial company in the United States after market capitalization, as a highly strategic combination that creates a «large-scale construction products and services company» that incorporates exceptional product, installation and service functions for orders, fire, safety, CF (heating ventilation and air conditioning) and energy solutions. The main objective of the operation seems to be gaining prominence in its priority area, which is becoming a behemoth in the order and equipment market. The new company will be able to experience immediate growth opportunities through cross-selling of products, complementary distribution networks and an expanded global reach. The geographical adjustment seems ideal, JCI being very efficient in the Chinese market and Tyco in Europe. A perverse result of this tax system is that, in the end, an independent U.S. company can pay higher taxes than an identical U.S. company owned by a foreign parent. While neither Democrats nor Republicans like inversions, there is no consensus on how to solve the problem, meaning a fundamental overhaul of the tax system will not take place in the near future. If wealthy U.S.
citizens give up their citizenship, they are supposed to pay an exit fee. However, if large U.S. companies transfer their homes, they are not required to pay such a fee. Hillary Clinton, the 2016 U.S. presidential candidate, is proposing to impose exit fees on companies that make business inversions. However, in the case of JCI, where U.S. shareholders hold less than 60% of the combined company, such a judgment is not applicable. In a conventional inversion, where the owners of the U.S. company own more than 60% of the combined business, the reverse business cannot access its money tax-free. But by structuring a deal that gives investors less than 60% of the property, they have circumvented these rules.
Businesses are looking for ways to cut costs and pay less tax. For now, the path chosen by a few is business reversal; and this practice will continue until significant tax reform takes place. While most merger discussions focus on inversion, the savings resulting from the synergies of complementary activities will also benefit the company, but also its shareholders and customers as a whole. Just prior to the merger, Tyco will split the reverse shares, so Tyco shareholders will get a fixed exchange ratio of 0.9550 shares for each of their existing Tyco shares. Johnson Controls and Tyco shareholders will both receive shares in Adient (Johnson Controls Automotive Experience), which will be distributed after the merger. The Adient split is expected to take place in early 2017. Johnson Controls shareholders may receive either one share of the combined company for each of their Johnson Controls shares or cash of $34.88 per share, or the average share price weighted by the volume of Johnson Controls for five days.