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Johnson Controls Plans to Sell Building-Management Business

Global Workplace Solutions Unit Expendable as Parent Moves to Making High-Value Equipment

Johnson Controls Inc. JCI +0.39% is seeking to sell its building-management service amid an effort to focus more tightly on making high-value equipment, the company said Tuesday.

The Global Workplace Solutions unit provides management, maintenance and repair services for a wide range of commercial buildings, including offices and computer-data centers. The unit accounted for about 10% of the Milwaukee-based company's $42.7 billion of sales in the fiscal year ended Sept. 30, 2013.

Global Workplace Solutions, part of Johnson Controls for three decades, has become expendable as Chief Executive Alex Molinaroli moves the company away from service businesses and certain lines of automotive components. Instead, he is focusing the company on York-brand heating and air-conditioning equipment for commercial buildings and on devices for monitoring and regulating electricity usage, temperature, fire safety and security.

"We want to be the more of a manufacturing company, more of a product company," he said in an interview.

Since being promoted to chief executive a year ago, Mr. Molinaroli has sold Johnson Controls' automotive electronics business in two stages, reaping $700 million from Gentex Corp. GNTX +0.10% and $265 million from Visteon Corp. VC -0.71% The company recently spun off a majority of its automotive-interiors business to Chinese supplier Yanfeng Automotive Trim Systems Co. Mr. Molinaroli said the sale of Workplace Solutions is likely to be the last divestiture for a while.

"We're basically done," he said.

Johnson Controls has stepped up its acquisitions lately to fortify its building-efficiency unit. In April, the company announced the acquisition of ventilation-equipment makerAir Distribution Technologies Inc. in Texas for $1.6 billion. The company agreed late last year to buy a 60% stake in Hitachi Ltd. 6501.TO +0.51% 's commercial air-conditioning business

Mr. Molinaroli said the company will use some of the proceeds from the sale of Workplace Solutions for additional investments. He predicted Johnson Controls will find a buyer within six months.

Analysts' estimates as to how much Workplace Solutions could fetch from a sale ranged from $600 million to more than $1.5 billion. They expect the business to generate a pretax profit margin of 1% to about 3% this year. Selling Workplace Solutions "enables the company to focus on higher return businesses across its HVAC equipment and controls catalog, " said David Leiker, an analyst for Robert W. Baird & Co., in a note Tuesday to investors.

Workplace Solutions has 16,000 employees world-wide involved in managing more than 1.8 billion square feet of corporate real estate. Through the first nine months of the company's fiscal year ending Tuesday, the business generated $3 billion in sales, 5.6% less than a year ago while operating income slipped 32% to $52 million. The company attributed the decline to lost customer accounts and lower revenue from project work hurt sales in the nine months.

Johnson Controls said Tuesday that profit from ongoing business rose 53% during the first three quarters of the year from a year ago. The company said the business also received a boost in July when U.K.-based Standard Chartered Bank hired Workplace Solutions to provide management services for 11.5 million square feet of corporate offices, branch banks, trading floors and other sites across Asia and the Pacific region. Terms of the contract were not disclosed.

For fiscal 2013, Workplace's sales were nearly flat at $4.2 billion, while operating income more than doubled to $114 million from $52 million with help from one-time pension-related gains.

Johnson Controls has retained Bank of America Merrill Lynch to assist with the planned sale.

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