United Technologies: Bigger…Better?
Reports of a potential Rockwell acquisition started dribbling out in early August, and continued into the end of the month. And now it's a done deal: United Technologies has agreed to buy Rockwell Collins for $TK billion, or $140 a share.
Canaccord Genuity's Ken Herbert explains why United Technologies need to make this deal:
We believe the acquisition will create the largest tier 1 aerospace supplier, with important positions on all major programs. Moreover, we believe this deal is partly in response to the increased pricing pressure from the leading aerospace OEMs (Airbus (EADSY) and Boeing (BA)) and the increased push by the leading OEMs, notably Boeing, into the commercial aftermarket, traditionally the source of most industry profits and cash flow. There is very little overlap between the current UTX and COL portfolios, and we do not anticipate any material regulatory hurdles as part of the acquisition process.
Shares of United Technologies have dropped 4% to $113.25 at 10:28 p.m. today, while Rockwell Collins has advanced 0.7% to $131.58, Boeing has dropped 0.9% to $238.28, and Airbus is little changed at $21.16.