Carrier Global Corp. (NYSE: CARR) said it would exit its Fire & Security and Commercial Refrigeration businesses over the course of 2024 in an effort to transform the company's business portfolio and establish it as a pure-play global provider of intelligent climate and energy solutions.
As part of the announced strategic actions, Carrier will acquire Viessmann Climate Solutions, the largest segment of Germany-based Viessmann Group, in a cash (80 percent) and stock (20 percent) transaction valued at approximately $13.2 billion, subject to working capital and other adjustments. The value represents approximately 13x projected 2023 EBITDA.
Privately held Viessmann Climate Solutions provides Palm Beach Gardens, Fla.-based Carrier with a premium brand in the highest growth segment of the global heat pump and energy transition markets, according to the announcement.
With 70% of its business consisting of heat pumps and related accessories, solar PV, batteries and services, Viessmann Climate Solutions is a leader in Europe's energy transition. The acquisition adds around 11,000 employees to Carrier. The transaction is expected to close around the end of 2023.
"The Viessmann Climate Solutions acquisition and planned exit of Fire & Security and Commercial Refrigeration will further simplify our business portfolio and accelerate our strategy to establish Carrier as the global leader in intelligent climate and energy solutions," stated Carrier Chairman & CEO David Gitlin. "Recent strategic actions, including the Toshiba Carrier Corporation acquisition and the sale of Chubb, have aligned our company with the most significant megatrends impacting the heating and cooling industry, including managing climate change and delivering on net zero emissions targets.”
Gitlin added that the planned exits “sharpen the strategic focus Carrier has gained through its 2020 spin-off from United Technologies. With Viessmann Climate Solutions, we are positioning ourselves to be the global climate solutions champion, poised to deliver higher growth and superior shareowner value.”
The planned exits do not include UTEC, Fire & Security's controls business for residential HVAC customers or Carrier Transicold's transport refrigeration, Profroid mechanical systems and Sensitech monitoring businesses.
Industry Observer Comments on Carrier’s Exit
Earlier this month, Carrier was reported to be exploring a potential sale or spin-off of its Fire & Security business segment. Sources told the Wall Street Journal that the process was in an early stage and there was no guarantee the company would follow through. The Fire & Security business accounted for about 17% or $3.6 billion of Carrier’s total sales of $20.4 billion in 2022.
Carrier was formed after United Technologies Corp. (UTC) separated itself into three independent companies in 2020, breaking apart one of the last industrial conglomerates based in the United States.
Among the company's fire/life-safety brands are the recently rebranded Kidde Commercial and Kidde Fire Systems, Edwards, GST, Autronica, Marigff and Det-Tronics. The security portfolio includes Supra, LenelS2, Aritech and Onity.
Carrier abandoning the Fire & Security business follows a familiar pattern of industrial conglomerates, including General Electric, that acquired their way into the industry only to exit after failing to gain enough traction or profits.
“When the original spin off becomes another spin off, leadership did not have the fortitude or appetite to make the fire business great again,” Kirk MacDowell, president of MacGuard Security Advisors, told SDM. “History tends to repeat itself and this is no different in the security and fire alarm manufacturing business. Large corporations look for ways to gain more share of wallet and enhance the brand so they look for ‘like’ businesses that they believe can be folded into an existing portfolio.”
What appears to happen time and again, MacDowell continued, is that leadership believes if you build it, they will come. “That’s not reality, but in their minds, they keep thinking about how that can enhance the brand and quite possibly their own career,” he said.
MacDowell, a long-time industry veteran, noted the vast expense and difficulty that manufacturers face trying to develop a product roadmap. “What I continue to see about three years after a large entity swallows up another manufacturing company to ‘enhance the brand,’ leadership decides that it’s too costly, too time consuming and no one steps up to be the person who will make it work.
“So, the business is jettisoned and the executives high five each other for another M&A accomplishment, this time getting rid of an asset that they should not have purchased in the first place. The press release reads something to the effect that ‘we want to focus on our core business.’”
MacDowell offered some free advice for any suitors looking at cutting a deal with Carrier:
“Make security and fire your core business,” he said. “Don’t repeat history.”