United Technologies Corp has told Honeywell that any potential tie-up between the two US aerospace giants would face “insurmountable regulatory obstacles and strong customer opposition”.
United Technologies Corp (NYSE:UTX) has told Honeywell (NYSE:HON) that any potential tie-up between the two US aerospace giants would face “insurmountable regulatory obstacles and strong customer opposition”.
The companies both manufacture aerospace components used by the likes of Airbus and Boeing, and both own space assets as well.
Responding to media reports, UTC has confirmed it had held “preliminary, exploratory” discussions about a range of potential collaborative options with Honeywell, but broke off talks, with CEO Greg Hayes (pictured) telling CNBC “it ain’t going to happen”.
According to multiple reports Honeywell made UTC a US$108 per share takeover offer, which included US$42 in cash, last week, which would create a US$94bn juggernaut. The proposal represented a premium of around 22% on UTC’s 19 February closing price causing UTC shares to spike on 22 February.
UTC poured cold water on the speculation saying that a combination with Honeywell “could either be blocked outright or conditioned on significant divestitures after a lengthy and disruptive review period that would destroy shareholder value”.
CNBC reported that UTC initiated talks with Honeywell a year ago when its market capitalisation was larger, but talks petered out after UTC’s stock fell and it became smaller than its target, and that Honeywell has now come in for UTC. Lazard and Centerview reportedly advised Honeywell while JP Morgan reportedly represented UTC. Both companies declined to comment on what advisers they worked with.
Honeywell has been in an acquisitive mood. On 4 February it closed its takeover of Canadian space hardware maker Com Dev for C$455m (US$332m). Honeywell CEO Tim Mahoney said the combination offered commercial and government customers access to one of the broadest space satellite equipment portfolios in the industry.
The New Jersey-based conglomerate has a 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, which later became Aerojet Rocketdyne Holdings.
As part of that transaction UTC agreed to sell its 50% stake in engine reseller RD Amross, a controversial joint venture with engine-maker NPO Energomash that sells on Russian-made RD-180 engines to launch provider United Launch Alliance.
The terms of the Aerojet Rocketdyne deal allowed the RD Amross stake to stay with UTC beyond the closing of the rest of the transaction as the Russian regulatory approval required to transfer the asset was anticipated to take a long time.
In April 2015 Aerojet Rocketdyne exercised the fourth and final three-month delay period written into the deal in a last ditch bid to get it over the line, but Russia refused to green-light the transaction meaning UTC retained its stake.