United Technologies Jumps as CEO Opens Door to Company Breakup
United Technologies Jumps as CEO Opens Door to Company Breakup
(Bloomberg) -- United Technologies Corp. climbed the most in 15 months after the company said it was weighing a breakup.
Splitting apart a portfolio that includes jet engines, elevators and air conditioners would result in companies that are more focused than the current behemoth, which has trailed peers on the stock market, said George Ferguson, an analyst at Bloomberg Intelligence.
“Every investor in this company probably wakes up every morning hoping they break this thing up,” he said Thursday. “You’ve got an elevator business, an air-conditioner business and an aerospace business, and I, frankly, don’t know what the heck they all do for each other.”
The possibility of a split marks a shift for Chief Executive Officer Greg Hayes, who previously deflected questions about whether the company would split up. United Technologies becomes the latest industrial conglomerate to explore such a move after General Electric Co. said it may break out its primary businesses into publicly traded companies.
United Technologies jumped 3.3 percent to close at $133.58 in New York, its biggest advance since November 2016 and the best gain on the Dow Jones Industrial Average. The shares have climbed 4.7 percent this year, trailing the 12 percent increase of a Standard & Poor’s index of aerospace and defense companies.
United Technologies is taking a fresh look in the mirror as its aerospace operations are poised for an overhaul from a blockbuster merger with Rockwell Collins Inc. The company’s Pratt & Whitney unit also is ramping up production of a new jet engine that has been plagued by delays and glitches.
“Is UTC a more valuable property together or is UTC better off in three separate businesses?” Hayes said at a Barclays conference in Miami on Wednesday. “That’s the question for the board. That’s the question we continue to study.”
Any portfolio change would come after the company completes the Rockwell deal, which is slated to close this year.
In the event of a split, Hayes projected an aerospace business with about $45 billion to $50 billion in sales. The Otis elevators operation would have about $12 billion to $13 billion, while the climate-control division, which makes Carrier air conditioners, would have $17 billion to $18 billion.
While United Technologies hasn’t been the target of a public activist campaign, analysts have said the company could be a candidate. Barclays analyst Julian Mitchell said in a note last week that the Farmington, Connecticut-based company was one of the likeliest targets, along with Eaton Corp. and Johnson Controls International Plc.
Hayes has described himself as his own activist. At an investor meeting last May, he said a breakup wasn’t under consideration but left the possibility open. “We’ll keep the portfolio together until we don’t,” he said.
To contact the reporter on this story: Richard Clough in New York at rclough9@bloomberg.net.
To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Tony Robinson, Susan Warren
©2018 Bloomberg L.P.