UTC to Acquire Rockwell Collins for $30B

The American aircraft manufacturing company, United Technologies Corporation, has reached an agreement to acquire Cedar Rapids, Iowa-based aviation systems and cabin equipment maker, Rockwell Collins Inc., through an estimated $30 billion transaction, including Rockwell Collins’ $7 billion debt and a total equity value of $23 billion, establishing a new aerospace systems supplier and cementing one of the largest deals ever in the aerospace industry that will work to meet the changing needs of global clients.

United Technologies, a Farmington, Connecticut-based corporation, is a deeply diverse business that includes the Otis escalator and elevator brands, and Pratt & Whitney, which makes high-performance aircraft engines, supplies aircraft companies such as Boeing, Airbus, Bombardier Inc., Embraer SA and other plane makers.

Rockwell Collins is a major avionics supplier to Boeing and Airbus and other plane makers also. In April, it added passenger seating, cabin interiors, lavatories, and galleys through its $6.4 billion acquisition of B/E Aerospace.

On Monday, both companies said that UTC will pay $140 per share in cash and in stock, split between $93.33 in cash and $46.67 in United Tech stock. The price represents a 17.6% premium to Rockwell’s $119 share price on August 3, the day before the media reported that UTC was weighing a bid for Rockwell.

Rockwell Collins Acquisition

UTC said that it will combine Rockwell Collins with its aerospace systems segment to form a new business unit named Collins Aerospace Systems and will fund the deal’s cash portion through cash on hand and debt issuances.

Kelly Ortberg, Chairman, President and CEO of Rockwell Collins, will serve as CEO of Collins Aerospace Systems, while Dave Gitlin, President of UTC Aerospace Systems, will take over as president and chief operating officer of the business unit upon the deal’s completion.

UTC Chairman and CEO, Greg Hayes, said, “The acquisition adds tremendous capabilities to our aerospace businesses and strengthens our complementary offerings of technologically advanced aerospace systems.”

“Together, Rockwell Collins and UTC Aerospace Systems will enhance customer value in a rapidly evolving aerospace industry by making aircraft more intelligent and more connected,” he added.

Buying Rockwell would give UTC more negotiating leverage over the airplane makers like Boeing and Airbus and would also help the firm gird itself against rivals such as Honeywell International.

The transaction is expected to close in the third quarter of 2018, and expected to generate more than $500 million in cost synergies by the fourth year after its completion, the companies said.

UTC and Rockwell Collins Stock Performance

Last Friday, Rockwell Collins’s shares closed at $130.61. It has a market value of $21.2 billion. Its shares have risen 9.8% in the last month, while United Technologies, which has a market cap of $94.2 billion, has slid 2.9% in the same period.

Additional News

United Technologies has long sought expansion through acquisitions. In 2012, it acquired Goodrich for $18 billion. But United declined a deal with Honeywell International last year, saying that regulators were likely to block it because of antitrust rules.

Last year, in another large aerospace deal, Warren E. Buffett’s Berkshire Hathaway acquired Precision Castparts, which produces parts for aerospace suppliers, for $37 billion including debt.