Johnson Controls Inc. (JCI) terminated its 5-year joint venture with French battery maker Saft Groupe SA by acquiring the latter’s share for $145 million in cash. The agreement also includes an up-front royalty payment by the company to Saft in return for an expanded license to the former to use certain Saft Lithium-ion technology.
The Johnson Controls-Saft Advanced Power Solutions joint venture was formed in January 2006 to develop, manufacture and sell lithium-ion batteries for hybrid and electric vehicles.
The joint venture opened the world’s first lithium-ion manufacturing facility for hybrid electric vehicles in 2008 in Nersac, France for producing lithium-ion batteries for hybrid, plug-in, fuel cell and electric vehicles.
The joint venture also has a plant in Holland, Michigan, where cell production is slated for launch later this year. These apart, it has a 58,000-square-foot Battery Technology Center in Milwaukee, Wisconsin. It is the largest and most sophisticated automotive battery research and development, engineering and validation facility, including cell design, system engineering, manufacturing, prototype assembly, testing and integration, in the U.S.
At the end of May, Johnson Controls had taken legal action in the Delaware Chancery Court to dissolve the joint venture due to a “fundamental disagreement” about the direction and scope of the joint venture. The company had stated that it wanted the partnership to have more flexibility and access to alternative technologies.
The transaction, which is subject to regulatory clearances, would close by September 30, 2011. Johnson Controls will retain all assets of the joint venture, except the facility in Nersac, France, which will be transferred to Saft at the end of next year.
The joint venture has production contracts with Daimler Mercedes S-Class hybrid, BMW 7-Series hybrid, Chery small sedan hybrid, Azure commercial delivery trucks hybrid Electric and Ford Motor’s (F) plug-in hybrid electric vehicle (PHEV).
It also has development contracts with Ford, General Motors (GM), SAIC, Daimler and United States Advanced Battery Consortium (USABC). Upon completion of the transaction, Johnson Controls will honor the company's existing contractual agreements.
Johnson Controls, a Zacks #3 Rank (Hold) stock, posted a modest 4% increase in profit to $383 million (excluding non-recurring items) in the third quarter of its fiscal year ended June 30, 2011 from $367 million (excluding non-recurring items) in the same quarter of fiscal 2010. On per share basis, profits rose to 56 cents from 54 cents, beating the Zacks Consensus Estimate by 3 cents per share.
The increase in profit was attributable to a double-digit increase in sales in all the company’s business segments, which was partially offset by disruptions in automotive production resulting from the earthquake and tsunami in Japan on March 2011.
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