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Acquisition boosts JCI in Europe

Johnson Controls Inc. is spending $435 million on the automotive electronics business of French technology company Sagem SA to improve its electronics capabilities in Europe.

The deal, a debt-funded cash transaction, will give Johnson Controls a business with expected 2001 sales of $522 million and an order backlog providing 20 percent annual growth through 2003. Most of Sagem's business is with French automakers Peugeot and Renault, which command 25 percent of the western European light vehicle market.

Johnson Controls' automotive electronics capabilities, gained mostly through its 1996 acquisition of Prince Automotive, have been limited to North America. The Sagem business complements the existing product portfolio, concentrating on engine and body electronics, executives said.

'When you look at our business today and the real estate we currently own in the interior of the cars ... obviously, there are lots of opportunities in the electronics Sagem offers, combined with ours, to really enrich that real estate,' said John Barth, Johnson Controls COO. 'Sagem offers us an opportunity to expand into Europe in a big way.'

The acquisition gives Johnson Controls capability for cockpit electronic systems. It also adds technical and manufacturing resources - including 500 engineers - to the supplier's European operations, about double the number of such engineers in North America. Sagem expertise will be leveraged in North America and other global markets, executives said.

One analyst estimated the acquired businesses provide profit of 5.5 percent before interest and taxes. The deal makes Johnson Controls a leader in automotive interior electronics and provides a strong footprint of engineering, product development and manufacturing in both North America and Europe, Goldman Sachs analyst Gary Lapidus said.

'The major interior players, JCI, Lear and Faurecia, are all focused on electronics as a key growth driver,' Lapidus said. 'Johnson Controls is raising the bar on capabilities with this acquisition.' The acquisition is expected to be complete in October.

Johnson Controls had total 2000 sales of $17.16 billion - $12.74 billion of it from automotive operations. In Europe, the company took in $4.8 billion, about $4 billion of it from automotive.

You can reach Amy Wilson at awilson@crain.com

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