United Technologies Pulls the Trigger on $30 Billion Deal for Rockwell Collins

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Late Monday afternoon, United Technologies Corp. (NYSE: UTX) announced that it had reached a definitive agreement to acquire Rockwell Collins Inc. (NYSE: COL) for $140 per share in cash and stock. UTC said the equity value of the deal was $123 billion, rising to $30 billion with the assumption of Rockwell’s debt.

This acquisition, the largest aerospace deal ever, has been talked about for a few weeks now, and Rockwell shareholders are getting a premium of 18% to the price when the rumors were first circulated and a premium of 30% to Rockwell’s share price at the end of July.

Under the terms of the agreement, each Rockwell shareholder gets $93.33 per share in cash and $46.67 in shares of UTC common stock, subject to a 7.5% collar centered on UTC’s August 22, 2017, closing share price of $115.69. UTC expects to fund the cash portion of the transaction consideration through debt issuances and cash on hand, and the company is committed to taking actions to maintain strong investment grade credit ratings. The transaction is expected to close by the third quarter of 2018, subject to approval by Rockwell Collins’ shareowners, as well as other customary closing conditions, including the receipt of required regulatory approvals.

UTC already owns aircraft engine maker Pratt & Whitney and currently manufactures other airplane parts. Rockwell specializes in avionics and, last year, spent more than $6 billion to acquire aircraft seat and interior maker B/E Aerospace.

UTC’s CEO Greg Hayes said:

This acquisition adds tremendous capabilities to our aerospace businesses and strengthens our complementary offerings of technologically advanced aerospace systems.

Kelly Ortberg, CEO of Rockwell Collins, added:

The combination will enable us to compete more effectively for future business through continued investments in innovation, world-class integrated product offerings and the ability to retain the top talent in the industry.

Once the transaction is completed, Rockwell and UTC’s Aerospace Systems division will be integrated to create a new business unit named Collins Aerospace Systems. Ortberg will assume the role of CEO of the unit.

UTC today also reaffirmed its expectations for 2017 sales of approximately $58.5 billion to $59.5 billion and adjusted earnings in the range of $6.45 to $6.60 per share.

In Tuesday’s premarket session, UTC stock traded down about 3.5%, at $113.85 in a 52-week range of $97.62 to $124.79. The 12-month consensus price target is $127.85.

Rockwell Collins stock was up 0.3% to $131.00, in a 52-week range of $78.54 to $131.17. The high was posted last Friday.