UTC Closes Rockwell Deal – Will Divest Non-Aero Companies

Among the items United Technologies produces are Pratt & Whitney jet engines. Photo: Chris Ratcliffe/Bloomberg News

Industrial conglomerate to spin off Otis and Carrier, after swallowing Rockwell Collins

11/26/18

By Dana Mattioli and Thomas Gryta
The Wall Street Journal

United Technologies Corp. has decided to separate itself into three independent companies, breaking apart one of America’s last industrial conglomerates.

The company, which makes everything from Otis escalators to Pratt & Whitney jet engines, said that it plans to spin off to shareholders its Otis division and Carrier building systems businesses. The Wall Street Journal had earlier reported on the plans to break apart.

The separation is expected to be completed in 2020 and leave UTC as a pure-play aerospace company, following its acquisition of airplane-parts maker Rockwell Collins Inc. That $23 billion cash-and-stock deal closed Monday after lengthy antitrust reviews in the U.S. and China.

The company’s current leader, Greg Hayes, will stay on as UTC’s CEO and chairman following the separation. The company didn’t name the leaders of the Otis and Carrier spinoffs.

The breakup comes as investors are pressuring traditional conglomerates to justify their existence.

One of UTC’s biggest rivals, General Electric Co. GE -1.85% , is essentially breaking itself apart after 126 years. Several activist investors have been pushing UTC to split, and Mr. Hayes has openly expressed his preference for smaller, more focused companies.

United Technologies has outperformed the broader market in the last year, with a 9.5% rise in its shares, while GE has lost almost 60% on troubles in its power business and financial services arm.

GE was once several times the size of UTC, but the combined market value of UTC and Rockwell Collins is now almost twice GE’s market value.

The Farmington, Conn., company has a market value of $103 billion and has expanded over the years by swallowing other players. Before the Rockwell deal, UTC’s revenue was about evenly split between airplanes and buildings.

UTC said its newly merged aerospace business would have had about $39 billion in revenue last year.

The Otis business had $12.3 billion in 2017 sales, while Carrier had $17.8 billion. For 2018, UTC has forecast companywide revenue of about $65 billion.

United Technologies was formed in 1934, but it expanded beyond its aerospace roots in the 1970s by acquiring Otis Elevator Co., which pioneered the elevator business, and Carrier Engineering Co., a large manufacturer of heating and air conditioning systems.

The company got embroiled in national politics in 2016 after then-presidential candidate Donald Trump criticized its decision to close a Carrier factory in Indiana and move production to Mexico. After Indiana offered financial incentives, Mr. Hayes agreed to keep some of the jobs at the factory.

UTC said the three companies are expected to pay an annual dividend of at least $2.94, the amount currently paid by the parent company.

Write to Dana Mattioli at dana.mattioli@wsj.com and Thomas Gryta at thomas.gryta@wsj.com.

Original story can be found here.

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