United Tech buys Rockwell in $US23 b deal

Aerospace and industrial company United Technologies Corp has no immediate plans to sell off other businesses after it agreed to acquire avionics supplier Rockwell Collins Inc in a $US23 billion ($A29 billion) deal that creates a powerhouse aerospace supplier.


On Tuesday United Tech also knocked down speculation that the acquisition would prompt it to spin off other businesses, such as Carrier air conditioners or Otis elevators.

“We need the cash flows from all the businesses to help pay down some of this debt” and retain an investment-grade credit rating, United Tech Chief Executive Officer Greg Hayes said on a conference call with analysts.

United Tech expects to borrow $US15 billion to fund the deal, Hayes said, and it will assume $US7 billion in Rockwell Collins debt as part of the transaction announced on Monday, which is expected to close by the third quarter of 2018.

“Because the deal is structured as a conventional acquisition with debt, United Tech has to pay some of this off before doing anything else,” said Robert Stallard, analyst at Vertical Research Partners.

The acquisition creates a major supplier to Boeing Co, Airbus SE and Bombardier at a time when the plane makers are pressing for price cuts and trying to compete against suppliers on services and spare parts.

It also marks the second large aerospace deal that creates an engines-to-seating supplier, following jet engine maker Safran SA’s pending $US7.7-billion deal to buy seat maker Zodiac Aerospace. Safran said Tuesday it would look at assets that might come up for sale after the United Tech-Rockwell deal.

Safran is part of CFM International, a joint venture with General Electric Co that makes LEAP engines used on Airbus A320 and Boeing 737 MAX aircraft.

United Technologies shares slumped 5.7 per cent and were the Dow’s biggest decliners, while shares of fellow Dow component, plane maker Boeing, fell 1.4 per cent. Rockwell Collins shares rose 0.3 per cent.