United Technologies to buy Rockwell Collins for US$23b, among biggest deals in aviation history

The ticker symbol for United Technologies is displayed on a screen on the floor of the New York Stock Exchange on July 20, 2015.
The ticker symbol for United Technologies is displayed on a screen on the floor of the New York Stock Exchange on July 20, 2015.PHOTO: REUTERS

NEW YORK (BLOOMBERG) - United Technologies Corp agreed to buy Rockwell Collins Inc for about US$23 billion (S$31.2 billion), creating an aerospace behemoth that can outfit warplanes and jetliners from tip to tail.

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

The transaction, one of the biggest in aviation history, creates an aircraft-parts giant better positioned to withstand the squeeze from planemakers Boeing and Airbus for pricing discounts and higher output. The combined 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.

The price of US$140 a share 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 said it will combine its aerospace business with Rockwell Collins in a new unit named Collins Aerospace Systems. Rockwell Collins Chief Executive Officer Kelly Ortberg will head the division, while Dave Gitlin, who currently runs UTC Aerospace Systems, will serve as president and chief operating officer.

The transaction tops United Technologies' own US$18 billion purchase of Goodrich Corp in 2012. Billionaire Warren Buffett's Berkshire Hathaway completed the biggest aerospace acquisition last year when it bought Precision Castparts Corp for US$37 billion, including debt.

In the latest deal, United Technologies is increasing its bet on aerospace, where it has stumbled recently with the rocky rollout of a new jet engine that cost US$10 billion to develop. The market accounts for about half of sales at the manufacturer, with the rest coming from elevators, air conditioners and other building systems.

When chief executive officer Greg Hayes took the helm in 2014, he pledged to consider major moves, including deals potentially in excess of US$20 billion. The company sold its Sikorsky helicopter business to Lockheed Martin Corp for US$9 billion in 2015. Hayes rejected a merger proposal in early 2016 from Honeywell International Inc., saying he didn't believe antitrust regulators would have approved the US$90 billion tie-up. Honeywell later abandoned the bid.

Rockwell Collins is already absorbing the largest acquisition in its history. The company earlier this year closed the acquisition of B/E Aerospace, adding deluxe jetliner seats, lavatories and galley equipment to a lineup of high-technology avionics products. That deal was valued at US$8.6 billion including the assumption of debt.