Honeywell has abandoned its pursuit of fellow manufacturing giant United Technologies Corp citing the target’s “unwillingness to engage in negotiations”.
Honeywell (NYSE:HON) has abandoned its pursuit of fellow manufacturing giant United Technologies Corp (NYSE:UTX) citing the target’s “unwillingness to engage in negotiations”.
The suitor had made public its US$108 per share takeover offer, which included US$42.63 in cash and would have given UTC shareholders 40% of the stock of the combined group.
Honeywell said its offer was worth US$90.7bn and represented a premium of around 22% on UTC’s 18 February closing price of US$88.36.
UTC’s CEO Greg Hayes (pictured) said that a combination with Honeywell had been discussed on-and-off for years to see if shareholder value had been created.
However, UTC’s lawyers led the company to conclude that a combination would be blocked outright.
“Even if it were possible to complete a transaction, the regulatory delay, required divestitures, and customer concerns and concessions would ultimately destroy shareholder value far beyond any synergies,” Hayes said.
Hayes also criticised the structure of Honeywell’s offer, saying it grossly undervalued UTC and overstated potential synergies.
“Effectively Honeywell’s proposal is a leveraged buyout of UTC using UTC’s own strong balance sheet,” Hayes said.
In a statement of its own Honeywell said it strongly disagreed with UTC’s characterisation of the risks associated with a merger. It was also disappointed that UTC had made public its dismay at the proposed deal despite initial discussions being amicable.
“We remain confident that the regulatory process would not have presented a material obstacle to a transaction. United Technologies felt the same way as we do when they approached us in May, 2011 and in April, 2015,” Honeywell said.
“Both companies have agreed in the recent past that the industrial logic was compelling in a very doable transaction.”
Honeywell has been in acquisition mode and closed its takeover of Canadian space hardware maker Com Dev for C$455m (US$332m) last month, bolstering its far-reaching space business spanning launch vehicles to spacecraft.
UTC offloaded the vast majority of its space business in 2013 when it sold rocketmaker subsidiary Pratt & Whitney Rocketdyne to Gencorp, but still reluctantly retains 50% of RD Amross as Russia refused to grant regulatory approval for it to sell the stake as part of the Rocketdyne sale.
