Johnson Controls Accelerates CEO Succession Plan -- Update
August 21 2017 - 1:25PM
Dow Jones News
By Cara Lombardo
Johnson Controls International PLC said Monday that Chief
Operating Officer George Oliver will assume the chief executive
post from Alex Molinaroli sooner than planned as the company looks
to regain its footing following its merger with Tyco International
PLC.
Mr. Oliver, who had been Tyco's CEO, will take on the top role
late next week rather than six months from now.
Johnson Controls said its board unanimously approved a plan for
Mr. Molinaroli, who started with the company in 1983 and has been
CEO since 2013, to leave his post and the board effective Sept. 1.
Mr. Molinaroli was expected to remain as chairman of the board for
a year after relinquishing his role as chief executive under the
original transition plan sketched out at the time of the
merger.
The news sent Johnson Control shares up 3.5% in Monday
trading.
Deane Dray, an analyst for RBC Capital Markets, said the
disappointing fiscal third-quarter results Johnson Controls posted
in July likely contributed to the board's decision to speed up Mr.
Molinaroli's departure. Shares in the company are down almost 9% in
the past year versus an 11% gain for the S&P 500 index over the
same time.
Changing leadership now eliminates the "transition overhang and
enables the company to start its fiscal 2018 [on Oct. 1] with the
leadership change already effective," Mr. Dray said in a note to
investors.
He added that Mr. Oliver will get a crack at setting Johnson
Controls guidance for fiscal 2018 at the start of the year instead
of inheriting a set of numbers March 1 from Mr. Molinaroli.
In conjunction with the change, board member Jürgen Tinggren
will become the board's lead independent director.
Mr. Tinggren said in prepared remarks that the board has been
impressed by Mr. Oliver's handling of the integration and believes
that "accelerating the transition provides clarity and
continuity."
Johnson Controls has been plagued by what analysts have called
an "alarming" cash flow shortfall, leaving it particularly
vulnerable to competition. The company also cut its 2017 earnings
per share range by 6 cents and its organic growth guidance from 3%
to 2%.
Mr. Molinaroli and other executives spent much of an earnings
call last month attributing the company's choppy cash flow to
strategic decisions, including the merger, and promising a quick
turnaround.
The tie-up with Tyco, completed last year, gave the maker of
power equipment and building controls a larger portfolio of
commercial heating, ventilation, air conditioning, and fire and
security offerings. Many investors have pushed for it to diversify
and pivot away from its core automotive equipment segment
faster.
Bob Tita contributed to this article.
Write to Cara Lombardo at cara.lombardo@wsj.com
(END) Dow Jones Newswires
August 21, 2017 13:10 ET (17:10 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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