Technology and aerospace giant United Technologies Corp (UTC) has issued equity units to raise around US$1bn to support its acquisition of manufacturer Goodrich.
The units, priced at US$50 each, are made up of shares and debt interests. A total of 22…
Technology and aerospace giant United Technologies Corp (UTC) has issued equity units to raise around US$1bn to support its acquisition of manufacturer Goodrich.
The units, priced at US$50 each, are made up of shares and debt interests. A total of 22 million of the units were issued, after underwriters exercised their overallotment option to acquire an additional two million of them.
Initially, the deal enables buyers to acquire a number of shares of common stock on 1 August 2015 at US$1 each, dependent on their trading value. It will also give purchasers a 5% undivided beneficial ownership interest in US$1000 principal amount of UTC’s junior subordinated notes due 2022. These notes will be in denominations of US$1000, so that the holding reflects the US$50 purchase price of the equity unit.
UTC holds the option of remarketing the units, which would see the notes being replaced with applicable ownership interests in its Treasury portfolio or for cash.
JP Morgan, BofA Merrill Lynch, Citigroup, Goldman Sachs and HSBC are joint book-running managers on the deal.
As well as issuing these equity units, the group is financing its acquisition of Goodrich through additional borrowing under the US$2bn term loan facility it secured on 24 April 2012, additional borrowing through commercial paper issuances, and the issuance of US$9.8bn of fixed and floating rate notes (FRNs) in an offering that closed on 1 June 2012.
“We may reduce a portion of these additional borrowings using available cash (up to approximately US$3.5bn) and the proceeds of certain non-core asset sales, stated UTC in an SEC filing on 14 June.
“The timing, amounts and terms of these borrowings and any subsequent reductions will depend on market conditions and other factors and our financing plans may change.”
UTC entered into a 364-day US$15bn bridge loan facility on 8 November 2011 with JP Morgan Chase, as administrative agent, and JP Morgan Securities, HSBC Securities (USA), BofA Merrill Lynch and Pierce, Fenner & Smith as joint lead arrangers and joint bookrunners. It later reduced commitments under the bridge facility by around US$9.7bn through the issuance of the US$9.8bn FRNs.
The group is also seeking to divest a number of assets to support the Goodrich deal, which it expects to close in mid-2012. One of these is UTC’s rocket systems developer Pratt & Whitney Rocketdyne. In total, the conglomerate expects to raise US$3bn from net divestitures.
JP Morgan and Goldman Sachs are financially advising UTC on the Goodrich deal, with Wachtell, Lipton, Rosen & Katz providing legal advice. Goodrich is advised by Credit Suisse and Citigroup, along with law firm Jones Day.
Although Goodrich’s core business centres on supplying aircraft components, it also develops satellite systems, such as the US Air Force’s ORS-1 satellite.
