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Johnson Controls, Saft agree to end JV

Johnson Controls Inc. and its hybrid-battery partner, Saft Groupe SA, have agreed to end the joint venture they formed to combine Saft’s battery expertise with Johnson Controls’ knowledge of the automotive industry.

The venture was formed in 2006 to develop and manufacture lithium-ion vehicle batteries.

Under terms of the breakup, Johnson Controls will acquire Saft’s share of the joint venture for $145 million in cash. The assets will be retained by Johnson Controls, with the exception of a plant in Nersac, France, which will be transferred to Saft at the end of 2012, the companies said in a joint statement.

The breakup agreement includes a royalty payment by Johnson Controls to Saft, in return for an expanded license to use certain Saft lithium-ion technologies. The transaction, subject to regulatory approval, could close as early as Sept. 30.

Alex Molinaroli, president of Johnson Controls’ power solutions division, said the joint venture made sense in 2006. But the marketplace changed, he said, and the joint venture hampered Johnson Controls’ ability to apply technologies in areas outside of automotive. The company also wanted the flexibility to sell batteries that use advanced chemistries other than lithium-ion.

"That was the kind of tussle we were having with Saft, to try and expand the joint venture and allow it, in our view, to be successful," Molinaroli said.

"The best thing was for us to chart our own course. For the $145 million in cash, we get the intellectual property rights we need to serve markets beyond the narrow scope of the joint venture. We get the assets, including all of the grants from the Department of Energy and the State of Michigan. We also get the employees and the contracts, and now we can integrate that into our strategy within power solutions," Molinaroli said.

"We get everything we wanted out of this," he added.

Analysts viewed the breakup as a positive for Johnson Controls.

"We like this agreement because (Johnson Controls) is now free to pursue the lithium-ion technology that is more in demand with current and potential customers, and it will also be able to sell lithium-ion batteries to its Building Efficiency division," analyst David Whiston with Morningstar Research said in a note to clients.

"Furthermore, (Johnson Controls) will keep its existing lithium-ion plant in Holland, Michigan, so losing the French plant should not set back the firm’s lithium-ion expansion," he added.