United Technologies Is Said to Weigh Deal for Rockwell Collins
(Bloomberg) -- Jet-engine manufacturer United Technologies Corp. is weighing an acquisition of aviation-equipment supplier Rockwell Collins Inc., according to people familiar with the matter, in a deal that would potentially rank among the largest ever in the aerospace industry.
Rockwell Collins has a market value of $19.3 billion, raising the prospect that a transaction would top United Technologies’ own $18 billion purchase of Goodrich Corp. in 2012. Billionaire Warren Buffett’s Berkshire Hathaway Inc. completed the biggest aerospace deal last year when it bought Precision Castparts Corp. for $37 billion.
Representatives of United Technologies and Rockwell Collins declined to comment Friday. There’s no certainty the deliberations will lead to a transaction, the people said, asking not to be identified because the details aren’t public. It’s unclear whether the companies are currently in talks, the people said.
A deal would give the aerospace manufacturers greater heft as Boeing Co. and Airbus SE squeeze suppliers for price reductions amid a planned production increase of narrow-body jetliners. While United Technologies makes a variety of aircraft parts, Rockwell Collins specializes in products that would complement its lineup: avionics and aircraft interiors.
“They would be investing in two of the real interesting and hot areas in aircraft today,” said Kevin Michaels, an aerospace consultant. “It completes the portfolio and there’s very little overlap.”
Rockwell Collins rose to a record $119 at the close of trading Friday in New York, before news of the potential deal. The shares climbed as much as 12 percent more in late trading. United Technologies, with a market value of $97 billion, was little changed.
A deal would bring together the largest and fourth-largest aircraft parts suppliers, Michaels said. Top competitors include Honeywell International Inc. and France’s Safran SA.
Rockwell Collins, based in Cedar Rapids, Iowa, is fresh off a sizable deal after closing the acquisition of B/E Aerospace in April, adding deluxe jetliner seats, lavatories and galley equipment to a lineup of high-technology avionics products. That deal was valued at $8.6 billion including the assumption of debt.
When United Technologies Chief Executive Officer Greg Hayes took the helm in 2014, he pledged to consider major moves, including deals potentially in excess of $20 billion. But with few attractive targets and a subsequent stock slump, he said he would prioritize share buybacks as long as the company felt it was undervalued. Hayes said in May that the company was looking for acquisition opportunities of about $250 million to $1 billion.
The Farmington, Connecticut-based manufacturer sold its Sikorsky helicopter business to Lockheed Martin Corp. for $9 billion in 2015. Hayes rejected a merger proposal in early 2016 from Honeywell, saying he didn’t believe antitrust regulators would have approved the $90 billion tie-up. Honeywell later abandoned the bid.
United Technologies generates about half of its sales from aviation through its Pratt & Whitney and aerospace divisions. The company also makes Otis elevators and Carrier air conditioners.
Hayes was in the spotlight last year as then-presidential candidate Donald Trump railed against Carrier’s decision to close a factory in Indiana and move work to Mexico. After the election, Trump and Hayes reached a deal to keep the U.S. factory open with a reduced workforce.