United Technologies to buy Rockwell Collins for US$23b

One of the biggest deals in aviation will create aerospace giant

NEW YORK: United Technologies Corp (UTC) has agreed to buy Rockwell Collins Inc for about US$23bil, creating an aerospace behemoth that can outfit jetliners and warplanes from tip to tail.

Rockwell Collins shareholders would receive US$140 a share in cash and stock, the companies said in a statement. Including net debt, the total deal value is about US$30bil.

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 UTC.

“This is a significant deal for UTC, all OEMs (original equipment manufacturers) and the aviation industry in general,” Hans Weber, president of San Diego-based consultancy Tecop International Inc, said in an e-mail.

“Rockwell Collins is the supplier of the avionics systems of the 787. With its acquisition UTC becomes a critically important supplier to Boeing and will have a strong negotiating position as Boeing is putting price pressure on suppliers.”

Consolidation is necessary for the aerospace-parts industry to improve its revenues, said Shukor Yusof, founder of aviation consultation Endau Analytics. Given that the industry remained fragmented, the deal didn’t mean UTC would monopolise the market following the acquisition, he said.

“I don’t see any regulatory hurdles in getting this deal done,” Shukor said by phone from Singapore.

UTC said it would 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 UTC, said in the statement. The company would focus on developing technologically advanced equipment to make aircraft “more intelligent and more connected.”

The price of US$140 a share represents an 18% 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.

Rockwell Collins has climbed 9.8% since initial reports of the deal talks, while UTC has fallen 2.9% in that span.

With the acquisition, UTC is increasing its bet on aerospace, where it has stumbled recently with the rocky rollout of a new jet engine that cost US$10bil to develop. The market accounts for about half of sales at the Farmington, Connecticut-based manufacturer, with the rest coming from elevators, air conditioners and other building systems.

The company expects the acquisition to add to adjusted earnings after the first year following closing, and generate US$500mil or more in annual pre-tax savings and other benefits by the fourth year. — Bloomberg

This acquisition adds tremendous capabilities to our aerospace businesses. Greg Hayes