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UTC-Rockwell Collins Merger: New Financial Details Emerge

On Nov. 26th, United Technologies announced its move to split the company into three separate businesses following the completion of the $30B Rockwell Collins acquisition on Nov. 23rd. The move will combine UTC’s Pratt & Whitney and United Technologies Aerospace Systems with Rockwell Collins to form Collins Aerospace Systems. The merger between UTC and Rockwell Collins is one of the largest in aerospace history, according to the Farmington, Conn., company.

As a result of the split, Climate, Controls & Security (CCS) is rebranding as Carrier and relocating to Palm Beach Gardens in South Florida, says the South Florida Business Journal. Otis Elevator Company, the world’s leading manufacturer of elevators and escalators, will continue as an independent business. The separation will continue into 2020 and be tax-free for UTC shareowners.

UTC anticipates each business to be better positioned to pursue future growth opportunities within their respective industries. UTC expects the three companies to have strong balance sheets and greater flexibility to take advantage of their markets. Greg Hayes, the CEO and chairman of UTC, is overseeing the transition and growth of each business.

“Our products make modern life possible for billions of people,” Hayes said. “I’m confident that each company will continue our proud history of performance, excellence and innovation while building an even brighter future. As standalone companies, United Technologies, Otis and Carrier will be ready to solve our customers’ biggest challenges, provide rewarding career opportunities and contribute positively to communities around the world.”

Following the acquisition of Rockwell Collins, UTC updated its financial outlook for 2018, projecting sales will rise from $64.5B to $65B and free cash flow will increase from $4.25B to $4.5B. For 2019, UTC estimates approximately $500 to $750M in accretion to free cash flow.

Investor Dan Loeb, CEO of Third Point, believes UTC’s split will result in $20B in shareholder value, according to a recent report from Bloomberg. The report added that UTC’s stock climbed one percent to $129.32 a share before trading began on Nov. 27th. There was little change following the official announcement of the merger, but it’s been said most aerospace and defense companies fell almost two percent throughout the day.

UTC projects Collins Aerospace Systems will employ 70,000 people across 300 sites. In four years, the deal is expected to generate over $500M in run-rate pre-tax cost synergies.

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