Nathan Bomey

USA TODAY

Manufacturing giants Johnson Controls and Tyco International plan to merge in another example of a controversial tax inversion, creating an industrial conglomerate with $32 billion in annual revenue.

The deal marks the latest occurrence of a corporate inversion, in which a U.S.-based company acquires a foreign firm and switches its headquarters to the foreign firm's home to lower its tax bill.

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The Milwaukee-based Johnson Controls (JCI) will shift its legal and global headquarters to Tyco's (TYC) Cork, Ireland, base, but will house its primary operational headquarters in Milwaukee.

The combined company hopes to tie together complementary businesses — including heating and air-conditioning systems, fire protection and security technology — as the home-products industry transitions toward a new world defined by smart, connected products known as the "Internet of Things."

"The technology is converging," Johnson Controls CEO Alex Molinaroli said on a conference call. "That’s the real opportunity that's coming along."

Shareholders of Johnson Controls will own 56% of the combined company, which will be known as Johnson Controls plc, and receive $3.9 billion in cash. Tyco shareholders will own 44%.

Johnson Controls plans to press ahead with its previously announced plans to spin off its remaining automotive seating and interiors business into an independent company called Adient at the beginning of its 2017 fiscal year.

The companies expect to shed $500 million in costs over the first three years of the deal and expect to save $150 million annually in taxes through the inversion.

S&P Capital IQ analyst Efraim Levy said in a research note that there is "significant potential" for savings through the combined operation.

Johnson Controls, known as JCI to many in the industry, had been pruning its operations in recent years, selling off its automotive electronics business and global workforce solutions unit. The company identified batteries and building products, such as heating and air conditioning technology, as its primary businesses.

Tyco broke up into three companies in 2012 and now focuses on fire protection and security products, including service, installation and monitoring.

The companies said they've identified immediate opportunities to sell their products to each other's customers.

Molinaroli will be chairman and CEO of the new company for the first 18 months following the deal's completion, while Tyco CEO George Oliver will become president and chief operating officer during that period. Afterward, Oliver will become CEO and Molinaroli will become executive chair.

"This is a transformational transaction that will help us both service our customers more comprehensively and innovatively," Molinaroli said. "It uniquely positions us to provide the most comprehensive portfolio of building and energy solutions."

Six of the new board's directors will come from JCI and five from Tyco.

After the automotive business spins off, the new Johnson Controls will get 70% of its revenue from physical products and 30% from services. Geographically, 56% will come from the Americas, 24% from Asia and 21% from Europe, the Middle East and Africa.

Oliver said the deal will position the new company to provide Internet-connected solutions to customers in increasingly urbanized world with smart mega cities.

"The world is headed toward a more connected future," he said on the conference call. "Together we will be more strongly positioned to (capitalize on the) Internet of Things."

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.