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United Tech forges Aerospace giant with US$23b Rockwell
[NEW YORK] United Technologies Corp agreed to buy Rockwell Collins Inc for about US$23 billion, creating an aerospace behemoth that can outfit jetliners and warplanes from tip to tail.
The transaction, one of the biggest in aviation history, creates an aircraft-parts giant better positioned to withstand the squeeze from planemakers Boeing Co and Airbus SE for pricing discounts and higher output. The resulting company will boast a broad suite of products for commercial aircraft, from Rockwell Collins's touchscreen cockpit displays to jet engines made by the Pratt & Whitney division of United Technologies.
"This is a significant deal for UTC and the aviation industry in general," Hans Weber, president of San Diego-based consultancy Tecop International Inc, said in an email. By buying Rockwell Collins, which delivers avionics systems for the US planemaker's 787, "UTC becomes a critically important supplier to Boeing and will have a strong negotiating position as Boeing is putting price pressure on suppliers." Rockwell Collins shareholders will receive US$140 a share in cash and stock, the companies said in a statement Monday. The price represents an 18 per cent premium to Rockwell Collins's closing level on Aug 4, before Bloomberg News reported on the deal talks. The Cedar Rapids, Iowa-based company closed at US$130.61 on Sept 1. United Technologies has fallen 2.9 per cent in that span. Including net debt, the total deal value is about US$30 billion.
Airbus issued a veiled warning to United Technologies to not let empire building get in the way of critical deliveries for the French planemaker. The US company supplies the Airbus A320 family of aircraft with its GTF engines, which have been dogged by technical glitches that have weighed on deliveries of the updated version of Airbus's best-selling model.
"Our total focus is on delivering planes, and we hope that this M&A would not distract UTC from their top operational priority," Airbus said by email. United Technologies plans to combine its aerospace business with Rockwell Collins in a new unit named Collins Aerospace Systems. Rockwell Collins CEO Kelly Ortberg will head the division, while Dave Gitlin, who currently runs UTC Aerospace Systems, will serve as president and chief operating officer.
"This acquisition adds tremendous capabilities to our aerospace businesses," Greg Hayes, chief executive officer of United Technologies, said in the statement. The company will focus on developing technologically advanced equipment to make aircraft "more intelligent and more connected." Consolidation is necessary for the aerospace-parts manufacturers, said Shukor Yusof, founder of aviation consultation Endau Analytics. Given that the industry remains fragmented, the deal isn't likely to encounter regulatory hurdles, he said.
Concessions are often required where regulators spot overlaps between companies that might allow them squeeze rivals or customers.
United Technologies only won EU approval to buy Goodrich, an aviation equipment producer, after an extended 2012 probe into antitrust concerns. The companies allayed regulatory worries by selling Goodrich units for electrical power generation and small engine controls and giving Rolls Royce the option to buy a Goodrich fuel nozzle research project.