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Acquisitions and Divestitures (Notes) | 12 Months Ended
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Sep. 30, 2018
Disclosure Acquisitions And Divestitures [Abstract] |
ACQUISITIONS AND DIVESTITURES | MERGER TRANSACTION As discussed in Note 1, "Summary of Significant Accounting Policies," of the notes to consolidated financial statements, JCI Inc. and Tyco completed the Merger on September 2, 2016. The Merger was accounted for as a reverse acquisition using the acquisition method of accounting in accordance with ASC 805, "Business Combinations." Based on the structure of the Merger and other activities contemplated by the Merger Agreement, relative outstanding share ownership, the composition of the Company's board of directors and the designation of certain senior management positions of the Company, JCI Inc. was the accounting acquirer for financial reporting purposes. Immediately prior to the Merger and in connection therewith, Tyco shareholders received 0.955 ordinary shares of Tyco (which shares are now referred to as shares of the Company, or “Company ordinary shares”) for each Tyco ordinary share they held by virtue of a 0.955-for-one share consolidation. In the Merger, each outstanding share of common stock, par value $1.00 per share, of JCI Inc. (“JCI Inc. common stock”) (other than shares held by JCI Inc., Tyco and certain of their subsidiaries) was converted into the right to receive either the cash consideration or the share consideration (each as described below), at the election of the holder, subject to proration procedures described in the Merger Agreement and applicable withholding taxes. The election to receive the cash consideration was undersubscribed. As a result, holders of shares of JCI Inc. common stock that elected to receive the share consideration and holders of shares of JCI Inc. common stock that made no election (or failed to properly make an election) became entitled to receive, for each such share of JCI Inc. common stock, $5.7293 in cash, without interest, and 0.8357 Company ordinary shares, subject to applicable withholding taxes. Holders of shares of JCI Inc. common stock that elected to receive the cash consideration became entitled to receive, for each such share of JCI Inc. common stock, $34.88 in cash, without interest, subject to applicable withholding taxes. In the Merger, JCI Inc. shareholders received, in the aggregate, approximately $3.864 billion in cash. Immediately after the closing of, and giving effect to, the Merger, former JCI Inc. shareholders owned approximately 56% of the issued and outstanding Company ordinary shares and former Tyco stockholders owned approximately 44% of the issued and outstanding Company ordinary shares. Tyco is a leading global provider of security products and services as well as fire detection and suppression products and services. The acquisition of Tyco brings together best-in-class product, technology and service capabilities across controls, fire, security, HVAC and power solutions to serve various end-markets including large institutions, commercial buildings, retail, industrial, small business and residential. The combination of the Tyco and JCI Inc. buildings platforms creates immediate opportunities for near-term growth through cross-selling, complementary branch and channel networks, and expanded global reach for established businesses. The new Company also benefits by combining innovation capabilities and pipelines involving new products, advanced solutions for smart buildings and cities, value-added services driven by advanced data and analytics. Fair Value of Consideration Transferred The total fair value of consideration transferred was approximately $19.7 billion. Total consideration is comprised of the equity value of the Tyco shares that were outstanding as of September 2, 2016 and the portion of Tyco's share awards and share options earned as of September 2, 2016 ($224 million). Share awards and share options not earned ($101 million) as of September 2, 2016 will be expensed over the remaining future vesting period. The following table summarizes the total fair value of consideration transferred:
(in millions, except for share consolidation ratio and share data) |  |
Number of Tyco shares outstanding at September 2, 2016 |  | 427,181,743 |
Tyco share consolidation ratio |  | 0.955 |
Tyco ordinary shares outstanding following the share consolidation and immediately prior to the Merger |  | 407,958,565 |
JCI Inc. converted share price (1) |  | $ | 47.67 |
Fair value of equity portion of the Merger consideration |  | $ | 19,447 |
Fair value of Tyco equity awards |  | 224 |
Total fair value of consideration transferred |  | $ | 19,671 |
(1) | Amount equals JCI Inc. closing share price and market capitalization at September 2, 2016 ($45.45 and $29,012 million, respectively) adjusted for the Tyco $3,864 million cash contribution used to purchase 110.8 million shares of JCI Inc. common stock for $34.88 per share.
Fair Value of Assets Acquired and Liabilities Assumed The Company accounted for the Merger with Tyco as a business combination using the acquisition method of accounting. The assets acquired and liabilities assumed were recorded at their respective fair values as of the acquisition date. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company's results of operations. The fair values of the assets acquired and liabilities assumed are as follows (in millions):
Cash and cash equivalents |  | $ | 489 |
Accounts receivable |  | 2,034 |
Inventories |  | 807 |
Other current assets |  | 617 |
Property, plant, and equipment - net |  | 1,216 |
Goodwill |  | 16,105 |
Intangible assets - net |  | 6,384 |
Other noncurrent assets |  | 536 |
Total assets acquired |  | $ | 28,188 |
Short-term debt |  | $ | 462 |
Accounts payable |  | 725 |
Accrued compensation and benefits |  | 312 |
Other current liabilities |  | 1,481 |
Long-term debt |  | 6,416 |
Long-term deferred tax liabilities |  | 718 |
Long-term pension and postretirement benefits |  | 774 |
Other noncurrent liabilities |  | 1,456 |
Total liabilities acquired |  | $ | 12,344 |
Noncontrolling interests |  | 37 |
Net assets acquired |  | $ | 15,807 |
Cash consideration paid to JCI Inc. shareholders |  | 3,864 |
Total fair value of consideration transferred |  | $ | 19,671 |
In connection with the Merger, the Company recorded goodwill of $16.1 billion, which is attributable primarily to expected synergies, expanded market opportunities, and other benefits that the Company believes will result from combining its operations with the operations of Tyco. Goodwill has been allocated to the reporting units within Building Technologies & Solutions business based on the expected benefits from the Merger. The Company recorded a net reduction in goodwill of $258 million in fiscal 2017 related to purchase price allocations. The goodwill created in the Merger is not deductible for tax purposes. The purchase price allocation to identifiable intangible assets acquired are as follows:
|  | Fair Value (in millions) |  | Weighted Average Life (in years)
Customer relationships |  | $ | 2,280 |  |  | 12
Completed technology |  | 1,650 |  |  | 11
Other definite-lived intangibles |  | 214 |  |  | 7
Indefinite-lived trademarks |  | 2,080 |  |  |
Other indefinite-lived intangibles |  | 90 |  |  |
In-process research and development |  | 70 |  |  |
Total identifiable intangible assets |  | $ | 6,384 |  |  |
Actual and Pro Forma Impact The Company's consolidated financial statements for the fiscal year ended September 30, 2016 include Tyco's results of operations from the acquisition date of September 2, 2016 through September 30, 2016. Net sales and net income (loss) from continuing operations attributable to Tyco during this period and included in the Company's consolidated financial statements for the fiscal year ended September 30, 2016 total $808 million and ($48) million, respectively. The following unaudited pro forma information assumes the acquisition had occurred on October 1, 2014, and had been included in the Company's consolidated statement of income for fiscal year 2016.
|  | Year Ended September 30,
(in millions) |  | 2016
Pro forma net sales |  | $ | 29,647 |
Pro forma net income from continuing operations |  | 1,143 |
In order to reflect the occurrence of the acquisition on October 1, 2014 as required, the unaudited pro forma results include adjustments to reflect, among other things, the amortization of the inventory step-up, the incremental intangible asset amortization to be incurred based on the preliminary values of each identifiable intangible asset, the change in timing of defined benefit plans' mark-to-market gain or loss recognition, the change in timing of transaction and restructuring costs, and interest expense from debt financing obtained to fund the cash consideration paid to JCI Inc. shareholders. These pro forma amounts are not necessarily indicative of the results that would have been obtained if the acquisition had occurred as of the beginning of the period presented or that may occur in the future, and does not reflect future synergies, integration costs, or other such costs or savings. Additional information regarding fiscal 2016 pro forma information can be found in the Form 8-K filed by the Company with the SEC on November 8, 2016 under Item 7.01, “Regulation FD Disclosure.” ACQUISITIONS AND DIVESTITURES Fiscal Year 2018 During fiscal 2018, the Company completed certain acquisitions for a combined purchase price, net of cash acquired, of $21 million, all of which was paid as of September 30, 2018. The acquisitions in the aggregate were not material to the Company’s consolidated financial statements. In connection with the acquisitions, the Company recorded goodwill of $14 million within the Global Products segment and $1 million within the Building Solutions EMEA/LA segment. In the first quarter of fiscal 2018, the Company completed the sale of its Scott Safety business to 3M Company. The selling price, net of cash divested, was $2.0 billion, all of which was received as of September 30, 2018. In connection with the sale, the Company recorded a pre-tax gain of $114 million within selling, general and administrative expenses in the consolidated statements of income and reduced goodwill in assets held for sale by $1.2 billion. The gain, net of tax, recorded was $84 million. Net cash proceeds from the transaction of approximately $1.9 billion were used to repay a significant portion of the Tyco International Holding S.a.r.L.'s ("TSarl") $4.0 billion of merger-related debt. The Scott Safety business is included in the Global Products segment and was reported within assets and liabilities held for sale in the consolidated statements of financial position as of September 30, 2017. Refer to Note 4, "Discontinued Operations," of the notes to consolidated financial statements for further disclosure related to the Company's net assets held for sale. Also during fiscal 2018, the Company completed certain divestitures primarily within the Global Products business. The combined selling price was $204 million, all of which was received as of September 30, 2018. In connection with the divestitures, the Company reduced goodwill by $35 million. The divestitures were not material to the Company's consolidated financial statements. Fiscal Year 2017 During fiscal 2017, the Company completed three acquisitions for a combined purchase price, net of cash acquired, of $9 million, $6 million of which was paid as of September 30, 2017. The acquisitions in the aggregate were not material to the Company’s consolidated financial statements. In connection with the acquisitions, the Company recorded goodwill of $2 million. In the second quarter of fiscal 2017, the Company completed the sale of its ADT security business in South Africa within the Building Solutions EMEA/LA segment. The selling price, net of cash divested, was $129 million, all of which was received as of September 30, 2017. In connection with the sale, the Company reduced goodwill in assets held for sale by $92 million. The divestiture was not material to the Company's consolidated financial statements. During fiscal 2017, the Company completed two divestitures for a combined selling price, net of cash divested, of $44 million, of which $40 million was received as of September 30, 2017. The divestitures were not material to the Company's consolidated financial statements. In connection with the divestitures, the Company reduced goodwill by $19 million and $2 million in the Global Products segment and in the Building Solutions Asia Pacific segment, respectively. During fiscal 2017, the Company completed one additional divestiture for a sales price of $4 million, all of which was received as of September 30, 2017. The divestiture decreased the Company's ownership from a controlling to noncontrolling interest, and as a result, the Company deconsolidated cash of $5 million. The divestiture was not material to the Company's consolidated financial statements. During fiscal 2017, the Company received $52 million in net cash proceeds related to prior year business divestitures and paid $75 million related to prior year business acquisitions. Fiscal Year 2016 On October 1, 2015, the Company formed a joint venture with Hitachi to expand its Building Technologies & Solutions product offerings. The Company acquired a 60% ownership interest in the new entity for approximately $208 million ($638 million purchase price less cash acquired of $430 million), $133 million of which was paid as of September 30, 2016. In connection with the acquisition, the Company recorded goodwill of $253 million related to purchase price allocations. Also during fiscal 2016, the Company completed two additional acquisitions for a combined purchase price, net of cash acquired, of $6 million, $3 million of which was paid as of September 30, 2016. The acquisitions in aggregate were not material to the Company's consolidated financial statements. In connection with the acquisitions, the Company recorded goodwill of $6 million. One of the acquisitions increased the Company's ownership from a noncontrolling to controlling interest. As a result, the Company recorded a non-cash gain of $4 million in equity income for the Global Products segment to adjust the Company's existing equity investment in the partially-owned affiliate to fair value. In the fourth quarter of fiscal 2016, the Company completed two divestitures for a combined sales price of $39 million, net of cash divested of $13 million. None of the sales proceeds were received as of September 30, 2016. The divestitures were not material to the Company's consolidated financial statements. In connection with the divestitures, the Company reduced goodwill by $16 million in the Global Products segment. In the third quarter of fiscal 2016, the Company completed a divestiture for a sales price of $16 million, all of which was received as of September 30, 2016. The divestiture was not material to the Company's consolidated financial statements. In connection with the divestiture, the Company reduced goodwill by $3 million in the Building Solutions North America segment. During fiscal 2016, the Company received $29 million in net cash proceeds related to prior year business divestitures.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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