UTC rebuffs Honeywell merger

Monday’s (February 22) news that the mooted merger of United Technologies Corp (UTC) and Honeywell has hit the buffers over antitrust concerns brings the possible union of two aerospace industry supplier giants grinding to a halt – for now.

According to the FT on Tuesday (February 23), UTC has cited “insurmountable regulatory obstacles and strong customer opposition” as reasons behind its resistance to any deal.

It also voiced concerns over how the companies would be valued, with the FT listing Honeywell’s valuation of UTC at around the $90bn mark. UTC reportedly sounded Honeywell out over a potential deal in April 2015 with talks stepping up in the past two weeks.

While concerns over a merged company controlling the lion's share of the aviation supply market are legitimate ones, the added reference to customer opposition is almost certainly referring to the likes of Boeing and Airbus, with both firms prominent users of UTC and Honeywell aircraft components.

The fact this isn’t the first time Honeywell has shown interest in UTC further adds to the intrigue. In 2000, UTC attempt at acquiring Honeywell ended in disappointment when rival GE put it a counter offer, only to see that deal fail to go through following opposition from EU regulators.

Rather than wait for another 15 years, it appears the merger talk could continue for the foreseeable future.

This is because despite Monday’s knock back and UTC chief executive Greg Hayes emphatically telling CNBC that “this deal just can’t get done”, it appears that Honeywell has yet to give up the ghost.

Chief executive Dave Cote stated yesterday that Honeywell remain optimistic of a deal and didn’t share UTC’s view that regulatory processes would nix the merger.

Given any resulting merger between the industry’s top two suppliers could generate in excess of $100bn in combined sales, it’s not hard to measure why Honeywell remains enthusiast for a deal to be done.

The reality of this at this stage remains a long shot.

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