UTC to split into three companies

NEW YORK: United Technologies Corp will break itself up, capping months of pressure on chief executive Greg Hayes to separate the conglomerate’s aerospace operations from its elevators and climate-controls divisions.

The company, buoyed by the just-completed $23 billion purchase of Rockwell Collins Inc, will retain its aerospace business and operate with two divisions: Pratt & Whitney jet engines and Collins Aerospace Systems.

“Otis Elevator Co and Carrier, a provider of air conditioners and heating systems, will be spun off as independent companies,’’ UTC said in a statement on Monday.

The three-way split caps a dramatic overhaul of UTC under Hayes, who negotiated the blockbuster Rockwell Collins acquisition last year and closed the deal this week.

Two activist investors, Bill Ackman of Pershing Square Capital Management and Dan Loeb of Third Point, took stakes in UTC and pushed for a break-up.

Loeb said a three-way split would unlock $20 billion in shareholder value.

“Our decision to separate United Technologies is a pivotal moment in our history and will best position each independent company to drive sustained growth, lead its industry in innovation and customer focus, and maximize value creation,” Hayes said in the statement.

Hayes will continue as chairman and CEO of UTC following the tax-free separations of Otis and Carrier, which are expected to be completed in 2020.

In pursuing a split, UTC will follow DowDuPont Inc, General Electric Co and Honeywell International Inc in busting up a diverse array of holdings.

Honeywell has spun off two low-growth businesses this year. DowDupont, the result of a merger between two chemical giants, will split into three separate companies next year. GE is aggressively selling assets to tighten its focus amid a steep stock decline.

At UTC, the world’s largest aerospace supplier, Collins Aerospace and Pratt & Whitney would have had sales of $39 billion last year on a pro forma basis, according to the statement. Otis, which has more than two million elevators in use, had $12.3 billion in sales last year. Carrier had $17.8 billion.

Until the transactions are completed, Farmington, Connecticut-based UTC will continue to pay its quarterly dividend of at least 73.5 cents a share.

Following the separation, the quarterly dividends paid by the three companies will initially total at least 73.5 cents a share. But “each company’s dividend policy will be determined by its respective board of directors following the completion of the separation,” according to the statement.