UTX United Technologies Corporation

By Thomas Gryta 

For a company that says it will wait until later this year to consider breaking up, United Technologies Corp. is already putting a lot of thought into the idea.

The Connecticut conglomerate on Friday detailed potential one-time costs of $2 billion to $3 billion for splitting into three units and said such a process would take 18 to 24 months to complete. The company previously had said the separate divisions would probably spend about $200 million a year each to be independent. The review, with the board of directors, will begin this summer and produce a decision by year-end.

"Will you really create long-term value for the shareowners by breaking the company up? That is the fundamental question," said CEO Greg Hayes at the company's annual analyst meeting in Florida on Friday. The company, which was formed in 1934, has a market value of $103 billion,

The idea of a breakup gathered momentum around September when United Technologies agreed to buy Rockwell Collins for $23 billion. In separating, Rockwell would merge with UTC's aviation-services division and Pratt & Whitney engines division to form a large aviation company, while the Climate, Controls & Security division and Otis elevators business would both become separate companies.

The company had planned to evaluate that idea in a couple of years because it needed the cash flow from the combined companies to pay down debt from the Rockwell deal, according to people familiar with the company's plans. The new federal tax law allowed the company to bring home overseas cash and more-quickly pay down debt, which meant it could move up the planned review to this summer when the deal closes.

The evaluation comes as investors are pressuring traditional conglomerates to justify their existence. General Electric Co. is evaluating separating its core business units into publicly traded companies. Honeywell International Inc. went through a similar process last year, ultimately deciding to spin off two units. While GE shares have tumbled more than 50% over the past year, shares of United Technologies have gained 15% and Honeywell have risen about 20%.

United Technologies revenue is about evenly split between airplanes and buildings.

In the 1970s, the company expanded beyond its aerospace roots by acquiring Otis Elevator Co., which pioneered the elevator business, and Carrier Engineering Co., a large manufacturer of heating and air-conditioning systems. United Technologies got embroiled in national politics last year after then-presidential candidate Donald Trump criticized its decision to close a Carrier factory in Indiana and move production to Mexico.

Its aerospace and jet-engine businesses had about $30.9 billion in revenue in 2017, while its other businesses brought in about $30.2 billion. Rockwell Collins had sales of about $6.8 billion in the fiscal year ending Sept. 17.

Write to Thomas Gryta at thomas.gryta@wsj.com

(END) Dow Jones Newswires

March 16, 2018 16:01 ET (20:01 GMT)

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