According to anonymous sources, Johnson Controls plans to sell its $1 billion automotive electronics unit.
Johnsons Controls’ automotive electronics business’ performance was lower than bidders’ expectations, making some interested parties change their mind about a possible deal. This forced the company to try to reach a broader group of buyers, including private equity companies. Parts makers Visteon Corp and Huayu Automotive Systems, which is owned by SAIC Motor, are two of the bidders that still show some interest in buying the unit.
The sources said that Delphi Automotive was part of the bidding process, but the company recently gave up pursuing a deal.
“Johnson Controls has been marketing its electronics business for divestiture,” the company said in a statement that did not directly address the private equity talks. “We have experienced strong interest from multiple strategic buyers. The process is proceeding as previously outlined.”
Johnson Controls put up for sales its automotive electronics units earlier this year, as it plans to focus on its higher-margin businesses, such as car seating, next-generation car batteries and building controls. The fact that the company chose to include private equity buyers, is a clear sign that the sale process is struggling.
“Technologically, it could improve under private equity because it would likely be more nimble and, depending how much cash was put into it, potentially quite innovative,” said IHS Automotive analyst Mark Boyadjis.