1 00:00:00,000 --> 00:00:03,000 Speaker 1: We're joined by Carrier chairman and CEO Dave Geitlin. So Dave, welcome, 2 00:00:03,000 --> 00:00:04,240 Speaker 1: Happy tow You're great to have you here. 3 00:00:04,280 --> 00:00:05,480 Speaker 2: Thank you, David. Happy New Year. 4 00:00:05,600 --> 00:00:08,119 Speaker 1: Back in April we talked about the Vestman acquisition that 5 00:00:08,200 --> 00:00:10,520 Speaker 1: closed actually today, and you said at the time you'd 6 00:00:10,560 --> 00:00:13,440 Speaker 1: be adding some stuff and subtracting sometimes you said specifically 7 00:00:13,560 --> 00:00:15,720 Speaker 1: you'd be getting rid of the security business, which you did. 8 00:00:15,880 --> 00:00:17,680 Speaker 1: Tell us about the vestment business and why that's your 9 00:00:17,840 --> 00:00:19,600 Speaker 1: north star. I think you call it, well. 10 00:00:19,440 --> 00:00:22,120 Speaker 2: It's a new year, but it's a new era for Carrier. 11 00:00:22,239 --> 00:00:24,200 Speaker 2: I could not be more excited about the Vestman deal. 12 00:00:24,239 --> 00:00:26,400 Speaker 2: I think history will say this is the most profound 13 00:00:26,480 --> 00:00:29,680 Speaker 2: acquisition and combination that our industry has ever seen. Because 14 00:00:30,240 --> 00:00:33,000 Speaker 2: at Carrier we're global leaders in just about every vertical, 15 00:00:33,040 --> 00:00:36,960 Speaker 2: every geography around the world. We had a glaring absence, 16 00:00:37,040 --> 00:00:40,520 Speaker 2: which is the residential space in Europe, which has become 17 00:00:40,600 --> 00:00:42,839 Speaker 2: the most important, highest growth market in the world. We 18 00:00:42,840 --> 00:00:45,160 Speaker 2: weren't a real player, so we're number one in commercial 19 00:00:45,720 --> 00:00:48,800 Speaker 2: h FAC in Europe, but we weren't present in residential. 20 00:00:48,920 --> 00:00:52,280 Speaker 2: It's become very high growth because everyone is transitioning from 21 00:00:52,320 --> 00:00:55,680 Speaker 2: gas and oil powered boilers to electric key pumps. We're 22 00:00:55,720 --> 00:00:57,800 Speaker 2: seeing on the commercial side. On the commercial side, our 23 00:00:57,880 --> 00:01:00,440 Speaker 2: heat pumps were up about thirty percent last year, but 24 00:01:00,520 --> 00:01:02,760 Speaker 2: the same is happening about the same percentages on the 25 00:01:02,760 --> 00:01:05,160 Speaker 2: residential side. So we wanted to get into the space, 26 00:01:05,480 --> 00:01:07,800 Speaker 2: and we are so fortunate to combine what is clearly 27 00:01:07,840 --> 00:01:10,520 Speaker 2: the single best company in that space. Trail your Visaman 28 00:01:10,560 --> 00:01:14,720 Speaker 2: Climate Solutions. We close today. Max Veisman, the fourth generation vsone, 29 00:01:14,720 --> 00:01:17,160 Speaker 2: officially joined our board today. He now owns about seven 30 00:01:17,160 --> 00:01:19,440 Speaker 2: percent of our company and we could not be more 31 00:01:19,480 --> 00:01:22,039 Speaker 2: thrilled to welcome the twelve thousand employees to our family. 32 00:01:22,200 --> 00:01:24,160 Speaker 1: So did we're here a lot about focus and focus 33 00:01:24,160 --> 00:01:26,600 Speaker 1: sounds pretty good to me if you can find it right. 34 00:01:26,720 --> 00:01:28,200 Speaker 1: At the same time, are there risks for that as well? 35 00:01:28,240 --> 00:01:30,319 Speaker 1: Because this is a heat pump company, a really foremost 36 00:01:30,319 --> 00:01:32,560 Speaker 1: heat pub company. There's been a little bit of softening 37 00:01:32,600 --> 00:01:34,319 Speaker 1: has there not been in Europe and heat comp pumps. 38 00:01:34,600 --> 00:01:36,720 Speaker 2: It's one of the beauties of Veisman is that they're 39 00:01:36,800 --> 00:01:39,639 Speaker 2: very balanced. They actually, yes they're number one in heat pumps, 40 00:01:39,680 --> 00:01:42,200 Speaker 2: but they also have a very strong boiler company, so 41 00:01:42,200 --> 00:01:45,240 Speaker 2: they're able to flex. So if you see boilers kind 42 00:01:45,280 --> 00:01:47,560 Speaker 2: of creep back in and increase a little bit more 43 00:01:47,600 --> 00:01:49,480 Speaker 2: than they had been. They can flex that way even 44 00:01:49,480 --> 00:01:52,120 Speaker 2: in the same factories. They produce both heat pumps and boilers, 45 00:01:52,400 --> 00:01:55,080 Speaker 2: so they not only have flexibility with boilers. They're the 46 00:01:55,120 --> 00:01:58,360 Speaker 2: only company in the world that provides complete home energy 47 00:01:58,400 --> 00:02:01,520 Speaker 2: management solutions for home, so they solar PV, they have 48 00:02:01,600 --> 00:02:03,920 Speaker 2: battery storage, they have heat pumps, they have a digital 49 00:02:03,960 --> 00:02:06,720 Speaker 2: overlay that interfaces with that grid and that's where the 50 00:02:06,720 --> 00:02:08,880 Speaker 2: puck is going. That's the future. They're the only ones 51 00:02:08,919 --> 00:02:11,200 Speaker 2: that do it globally. We want to take that technology, 52 00:02:11,480 --> 00:02:13,360 Speaker 2: bring it to the US, and then bring it outside 53 00:02:13,360 --> 00:02:14,120 Speaker 2: of Europe as well. 54 00:02:14,200 --> 00:02:16,320 Speaker 3: Do you think the appetite here in the US is 55 00:02:16,360 --> 00:02:17,839 Speaker 3: the same as it is in Europe for that type 56 00:02:17,840 --> 00:02:18,399 Speaker 3: of technology. 57 00:02:18,400 --> 00:02:19,960 Speaker 2: I think it's going to grow over time. It's not 58 00:02:20,040 --> 00:02:22,240 Speaker 2: there yet, but I do think what we need to 59 00:02:22,280 --> 00:02:25,360 Speaker 2: do is provide the value propositions to the customer. Because 60 00:02:25,400 --> 00:02:28,679 Speaker 2: today at Carrier, we cool five hundred million people a day, 61 00:02:28,760 --> 00:02:31,080 Speaker 2: and we also consume a lot of the grid's energy. 62 00:02:31,240 --> 00:02:34,560 Speaker 2: So we at Carrier consume about three percent of the 63 00:02:34,840 --> 00:02:36,720 Speaker 2: energy from the grid today. So we need to be 64 00:02:36,760 --> 00:02:39,120 Speaker 2: part of the solution because what's going to happen is 65 00:02:39,120 --> 00:02:41,360 Speaker 2: that everyone's going to get home between five and ten pm, 66 00:02:41,400 --> 00:02:44,200 Speaker 2: plugging their cars, turn on their either air conditioning or heating. 67 00:02:44,200 --> 00:02:46,200 Speaker 2: Both are going to be electric, and you're going to 68 00:02:46,200 --> 00:02:48,520 Speaker 2: put max demand on the grid between those hours. We 69 00:02:48,560 --> 00:02:50,400 Speaker 2: need to do load shedding, and we can do that 70 00:02:50,440 --> 00:02:53,960 Speaker 2: as we start to provide batteries, storage management, and interface 71 00:02:54,000 --> 00:02:55,560 Speaker 2: with the grid. That's what we're going to be provided. 72 00:02:55,600 --> 00:02:57,440 Speaker 3: That doesn't sound like something though, that you can do 73 00:02:57,639 --> 00:02:59,840 Speaker 3: solely alone as a company, that you need all of 74 00:02:59,840 --> 00:03:02,480 Speaker 3: the buy in from regulators at the federal level and 75 00:03:02,520 --> 00:03:03,960 Speaker 3: of course at the local level as well. 76 00:03:04,040 --> 00:03:06,200 Speaker 2: It's going to be an ecosystem solution. Yes, there will 77 00:03:06,240 --> 00:03:09,520 Speaker 2: be some interface with governments, there will be some interface 78 00:03:09,560 --> 00:03:12,080 Speaker 2: with utilities. It's going to be a solution that we 79 00:03:12,120 --> 00:03:14,360 Speaker 2: either make or buy batteries ourselves. So it's going to 80 00:03:14,400 --> 00:03:17,639 Speaker 2: require partnerships, it's going to require ecosystem but we want 81 00:03:17,639 --> 00:03:19,959 Speaker 2: to be the front leaders in that space. 82 00:03:20,080 --> 00:03:21,760 Speaker 1: So these are the acquisitions you're bringing. What about the 83 00:03:21,760 --> 00:03:24,560 Speaker 1: dispositions We just talked about security with Honeywell, I know 84 00:03:24,600 --> 00:03:26,960 Speaker 1: you've made a deal on refrigeration. At the same time 85 00:03:27,000 --> 00:03:30,120 Speaker 1: you still have fire both residential and commercial worry with that. 86 00:03:30,480 --> 00:03:33,280 Speaker 2: Yes, So we're thrilled with the what you just saw 87 00:03:33,320 --> 00:03:35,800 Speaker 2: from VMA. We're very excited about the deal on this 88 00:03:35,960 --> 00:03:38,360 Speaker 2: disposition of security. It's a great business, it's going to 89 00:03:38,400 --> 00:03:40,400 Speaker 2: a great owner and honeywell, we sold it for about 90 00:03:40,400 --> 00:03:43,800 Speaker 2: five billion dollars seventeen x ebit multiple. We get the 91 00:03:43,800 --> 00:03:46,720 Speaker 2: same multiple on the sale of our stationary refrigeration business 92 00:03:46,720 --> 00:03:50,000 Speaker 2: to hire about seventeen x. What that leaves is our 93 00:03:50,040 --> 00:03:52,080 Speaker 2: fire business, and we're selling that. We're going to dispose 94 00:03:52,080 --> 00:03:54,400 Speaker 2: of that in two different pieces. There's our industrial fire 95 00:03:54,480 --> 00:03:57,560 Speaker 2: piece that's progressing extremely well. We're in the market, we're 96 00:03:57,560 --> 00:03:59,920 Speaker 2: in negotiations, we're in discussions with a number of pretent 97 00:04:00,760 --> 00:04:03,560 Speaker 2: buyers there. That's going to be hopefully sold by the 98 00:04:03,680 --> 00:04:05,720 Speaker 2: end of the first quarter. And then beyond that, we 99 00:04:05,760 --> 00:04:08,360 Speaker 2: have our residential and commercial fire which will either spin 100 00:04:08,400 --> 00:04:10,800 Speaker 2: as part of a public company or a sale process. 101 00:04:10,920 --> 00:04:13,120 Speaker 1: You have for much to consolidate here. How long do 102 00:04:13,160 --> 00:04:15,000 Speaker 1: you think it will take to consolidate? What point are 103 00:04:15,000 --> 00:04:17,440 Speaker 1: you back in the market maybe for further acquisitions. 104 00:04:17,720 --> 00:04:19,760 Speaker 2: What what we've said is first we're going to dispose, 105 00:04:20,000 --> 00:04:22,120 Speaker 2: then we're going to get our multiple our debt to 106 00:04:22,160 --> 00:04:24,440 Speaker 2: EBITDA down to about two x. At that point, we'll 107 00:04:24,440 --> 00:04:26,800 Speaker 2: do a share buyback of at least the amount of 108 00:04:26,839 --> 00:04:29,320 Speaker 2: shares that we issued to Max Visman and the Visman 109 00:04:29,360 --> 00:04:32,040 Speaker 2: family is part of the acquisition, So we'll do a 110 00:04:32,080 --> 00:04:33,960 Speaker 2: buyback of at least two and a half billion dollars. 111 00:04:33,960 --> 00:04:36,560 Speaker 2: Once our multiples get back to about two x, our 112 00:04:36,600 --> 00:04:39,359 Speaker 2: leverage ratio to about two x, and then we've always 113 00:04:39,360 --> 00:04:41,720 Speaker 2: said that our long term focus is growth, both organic 114 00:04:41,760 --> 00:04:43,720 Speaker 2: and organic. It's going to take a little bit for 115 00:04:43,800 --> 00:04:46,000 Speaker 2: us to do meaningful acquisitions, but we will get there 116 00:04:46,040 --> 00:04:49,239 Speaker 2: after the buyback and after our leverage ratios are intact. 117 00:04:49,279 --> 00:04:50,880 Speaker 3: What does that organic growth look like. 118 00:04:51,279 --> 00:04:54,520 Speaker 2: Well, we've said that our model is six to eight 119 00:04:54,520 --> 00:04:56,960 Speaker 2: percent growth annually and when. What we are doing with 120 00:04:57,040 --> 00:04:59,640 Speaker 2: our business exits is we've been exiting some of our 121 00:04:59,640 --> 00:05:02,440 Speaker 2: lower growth businesses and adding higher growth businesses. So we 122 00:05:02,520 --> 00:05:06,680 Speaker 2: added Toshiba's very high growth VRF variable fridge and flow technology, 123 00:05:06,680 --> 00:05:09,200 Speaker 2: which is very popular in Asia. It's becoming more popular 124 00:05:09,200 --> 00:05:12,599 Speaker 2: in Europe and the United States. We exited our chub 125 00:05:12,720 --> 00:05:15,680 Speaker 2: Field distribution business that was lower growth for us. We're 126 00:05:15,680 --> 00:05:18,200 Speaker 2: now adding Vestman, which is going to be long term 127 00:05:18,240 --> 00:05:21,600 Speaker 2: double digit growth consistently over a period of time. So 128 00:05:21,680 --> 00:05:23,800 Speaker 2: we look at ourselves at a six to eight percent 129 00:05:23,920 --> 00:05:25,080 Speaker 2: organic growth type business. 130 00:05:25,120 --> 00:05:27,560 Speaker 3: Do you think the regulatory environment when it comes to 131 00:05:27,600 --> 00:05:30,200 Speaker 3: acquisitions and for that matter, to vestitures will work in 132 00:05:30,240 --> 00:05:33,320 Speaker 3: your favor. When the Visman acquisition was announced, of course 133 00:05:33,360 --> 00:05:34,839 Speaker 3: there was a lot of hand rigging over there in 134 00:05:34,880 --> 00:05:37,520 Speaker 3: Germany about whether they really wanted to sell this company 135 00:05:37,680 --> 00:05:39,600 Speaker 3: to an American and let's just call it what it 136 00:05:39,680 --> 00:05:42,320 Speaker 3: was here. Obviously they let the deal go through, but 137 00:05:42,400 --> 00:05:45,960 Speaker 3: as you know, that scrutiny has been ratcheted up a lot, well. 138 00:05:45,720 --> 00:05:48,360 Speaker 2: Their scrutiny in China, throughout Europe and the United States. 139 00:05:48,560 --> 00:05:50,680 Speaker 2: The key is to do deals that are good for growth. 140 00:05:50,839 --> 00:05:54,120 Speaker 2: If you're buying growing businesses, you're investing in the businesses. 141 00:05:54,120 --> 00:05:56,960 Speaker 2: You're growing the business We're investing in the German businesses, 142 00:05:57,000 --> 00:05:59,560 Speaker 2: the German factories, the German people. So we think as 143 00:05:59,640 --> 00:06:02,159 Speaker 2: long as we're providing good growth, good opportunities for our 144 00:06:02,200 --> 00:06:04,640 Speaker 2: people globally, the regulatory environment will support. 145 00:06:04,800 --> 00:06:07,040 Speaker 1: Talking about environment, what about geopolitics. We're coming out of 146 00:06:07,040 --> 00:06:09,960 Speaker 1: twenty twenty three a lot of geopolitics playing around the world. 147 00:06:10,480 --> 00:06:13,280 Speaker 1: How is it affecting carrier, if at all, we do. 148 00:06:13,279 --> 00:06:16,000 Speaker 2: Our best to navigate and be as balanced as possible. 149 00:06:16,040 --> 00:06:19,440 Speaker 2: We're particularly interested right now. India looks very encouraging to us. 150 00:06:19,640 --> 00:06:22,400 Speaker 2: We're very interested in Saudi Arabia, great growth prospects there. 151 00:06:22,480 --> 00:06:24,760 Speaker 2: We have a very strong presence in China. We have 152 00:06:24,760 --> 00:06:27,000 Speaker 2: a bit of a China plus one strategy where we 153 00:06:27,080 --> 00:06:29,680 Speaker 2: invest in China, will continue to invest in China, but 154 00:06:29,720 --> 00:06:32,400 Speaker 2: we also have some level of redundancy outside of China. 155 00:06:32,800 --> 00:06:36,320 Speaker 2: Europe seems relatively stable to us right now, So geopolitically, 156 00:06:36,600 --> 00:06:38,359 Speaker 2: we do our best to navigate it because we're a 157 00:06:38,440 --> 00:06:41,160 Speaker 2: very eighty very global company. Eighty percent of our people 158 00:06:41,160 --> 00:06:43,599 Speaker 2: are outside the United States, and we've been pretty adept 159 00:06:43,640 --> 00:06:45,440 Speaker 2: at managing the geopolitics thus far. 160 00:06:45,720 --> 00:06:48,040 Speaker 1: Well, congratulations on the big deal. You're closed today, David, 161 00:06:48,080 --> 00:06:49,200 Speaker 1: Really great to have you with us.