United Tech in Takeover Talks With Rockwell Collins -- Update
August 07 2017 - 12:40PM
Dow Jones News
By Dana Mattioli and Joann S. Lublin
United Technologies Corp. has made an approach to acquire
Rockwell Collins Inc., but the two aerospace suppliers are still
wrangling over the price of a takeover that would exceed $20
billion, according to people familiar with the matter.
United Technologies recently made an initial offer of less than
$140 a share, according to one person familiar with the matter. The
two sides are still in discussions and it is unclear if they will
result in an agreement, the people said.
The timing of the discussions is unusual as they come just a few
months after Rockwell Collins closed on its $6.4 billion purchase
of B/E Aerospace. United Tech executives have recently said they
are looking for potential acquisitions, but suggested they would
focus on smaller transactions.
Rockwell Collins had a $19.4 billion market value as of Friday's
close. The company's share price gained 3% to $122.71 in afternoon
trading Monday, following earlier reports of the discussions.
Shares of United Technologies slipped 2%.
A deal would increase United Technologies' role as a major
supplier to Boeing Co. and Airbus SE as the industry boosts
production for a new generation of jets. The company already owns
one of the world's biggest jet engine makers, Pratt & Whitney,
as well an aerospace division that makes parts such as wheels and
landing gears.
Rockwell specializes in cockpit displays and communications
systems for passenger jets and military programs. In April, the
Cedar Rapids, Iowa, company closed its acquisition of B/E
Aerospace, a big maker of plane seats and interiors. The deal added
almost $3 billion in annual sales to a company with about $5.3
billion in revenue.
In June, United Technologies Chief Executive Greg Hayes told
analysts the company, which had about $7 billion in cash, was
looking to spend around $1 billion on acquisitions this year. "As
far as bigger M&A, it's something we always look at, but I am
reluctant to go out and pay some of the prices that we see today,"
Mr. Hayes said at the Paris Air Show.
The Farmington, Conn., company also manufactures Otis elevators
and Carrier air conditioners, but more than half of its $15.28
billion in second-quarter revenue came from its jet engine and
aerospace divisions. United Technologies sold its Sikorsky
helicopter business to Lockheed Martin Corp. in 2015.
Analysts at William Blair said a takeover of Rockwell Collins
would make "tremendous strategic sense" as it would expands United
Technologies' most profitable business with little overlap. But the
firm thinks a deal is unlikely because UTC management has said it
is interested in smaller deals.
Several analysts noted they wouldn't expect significant
antitrust issues with a merger, but airplane makers may voice
concerns about the consolidation among their suppliers. Both
companies are also major Pentagon suppliers.
Credit Suisse analyst Julian Mitchell said the timing is curious
for a deal because United Technologies waited for Rockwell
Collins's acquisition of BE Aerospace in April to close and the
subsequent 20% increase in its stock price.
Last month, Mr. Hayes warned that the company may need to raise
prices for its jet engines and aerospace parts, if airplane makers
like Boeing and Airbus try to steal some of its lucrative
maintenance business. Jet engine makers typically sell the engines
with little or no profit but then make up the money by selling
decades of servicing and parts.
Boeing recently created a new unit to develop and build aircraft
avionics systems, focusing on equipment for future products but
moving deeper into the territory of Rockwell Collins and Honeywell
International Inc.
Meanwhile, Honeywell is reviewing whether to break off its own
aerospace division by the fall after activist Third Point LLC made
a public push for a spinoff. The division, Honeywell's largest,
also supplies parts for Airbus and Boeing jets along with engines
for aircraft made by Bombardier Inc. and Textron Inc.
Thomas Gryta
contributed to this article
Write to Dana Mattioli at dana.mattioli@wsj.com and Joann S.
Lublin at joann.lublin@wsj.com
(END) Dow Jones Newswires
August 07, 2017 13:25 ET (17:25 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
United Technologies (NYSE:UTX)
Historical Stock Chart
From Mar 2024 to Apr 2024
United Technologies (NYSE:UTX)
Historical Stock Chart
From Apr 2023 to Apr 2024