United Technologies Corp. (UTC) closed on its record-making $30 billion acquisition of Rockwell Collins Nov. 26, and announced it will spin off non-aerospace business units Carrier and Otis Elevator Co. and become a pure-play, potentially $50 billion Tier 1 aerospace parts, engines and services provider.
Long expected by Wall Street, UTC’s breakup heralds an end to an era of industrial conglomerates participating in aerospace and defense, as Honeywell, General Electric and others also have sold off non-aero units.
The remaining UTC will focus on aerospace and defense (A&D) with two surviving brands: Collins Aerospace and Pratt & Whitney. Collins Aerospace is the new mashup of UTC Aerospace Systems and Rockwell.
“Our decision to separate United Technologies is a pivotal moment in our history and will best position each independent company to drive sustained growth, lead its industry in innovation and customer focus, and maximize value creation,” UTC chairman and CEO Greg Hayes said in an early Nov. 27 teleconference. “There’s no weak sister going forward that we’re worried about.”
First announced in September 2017, the Rockwell deal was initially not guaranteed because of the price and potential Boeing opposition. Later, Wall Street feared the deal would be caught up in political tensions inside and between Washington and Beijing.
But Kelly Ortberg, the former Rockwell chief who is now Collins CEO, told ATW the real hang-up was the size and complexity of the merger of UTAS and Rockwell for antitrust regulators to review. He also asserted that Boeing was not a problem. “There’s been a lot of speculation that this merger is about bulking up so we could go fight [Boeing]—that couldn’t be further from the truth, and I hope you print that,” he said.
According to Hayes and UTC CFO Akhil Johri, the new A&D-focused UTC should reach $50 billion by 2020.
UTC’s expected cash-generation should be enough to fund any new P&W engine, Johri said. Detailed forecasts were not provided and will not be until UTC’s annual financial report in January 2019.