Scrabo
Pattern Altitude
Honeywell, United Technologies held merger talks: Sources
David Faber | @DavidFaber
[2/22/2016]
http://www.cnbc.com/2016/02/22/hone...adline|headline|story&par=yahoo&doc=103407867
Aerospace giants Honeywell and United Technologies have recently held talks about a merger that would create a $94 billion sales colossus, according to people familiar with the situation.
The discussions occurred within the last two weeks and were focused on a deal in which Honeywell offered a premium, largely in stock with some cash, for the smaller united technologies.
Shares in United Technologies jumped on the news.
There is no assurance that the talks will lead to a deal. There are significant concerns on the UTX side over whether any combination can pass an anti-trust review, given the two companies provide so much of what goes into an airplane and would likely face opposition from the likes of Boeing and Airbus.
It is therefore unclear whether Honeywell, which initiated the latest talks, will emerge with a deal. The current talks represent the latest engagement in an on-again-off-again courtship that began almost one year ago and has changed shape as the respective market caps of the two companies have diverged.
Earlier last year, when UTX was larger in value than Honeywell, UTX CEO Greg Hayes approached his counterpart at Honeywell, David Cote, about the possibility of merging the two companies. Those discussions centered on a deal that represented a merger of equals, but would have had UTX management in control, according to people close to the conversations. Those talks broke down when United Technologies' stock price suffered significant declines and the two companies found themselves unable to agree on who would be in control of the combination.
Last fall, Honeywell turned the tables and approached UTX about a deal. The so called "bear hug" letter that was sent to UTX offered its holders a slight premium for their shares, but was structured as a merger of equals, sources said. That proposal was turned down by UTX last October, which cited concern about anti-trust risk as the key impediment. Honeywell decided against making the proposal public and the two companies had no contact for the months that followed.
But as Honeywell's stock outperformed UTX and its market value grew to be roughly $10 billion more than UTX, it was emboldened to try again. In recent weeks, Cote presented a new cash and stock proposal that would provide a premium to UTX holders. The exact terms of the proposal could not be determined, but given their respective sizes, any combination would end up with roughly equal ownership of a combination.
The industrial logic of a combination has been a focus of current and previous managements at both companies. In October of 2000, UTX was close to a deal to buy Honeywell — only to watch that deal trumped by an offer from GE, which after opposition from EU regulators found itself unable to close the transaction.
The two companies are leaders in aviation and aerospace, where UTX's Pratt & Whitney makes aircraft engines and both companies provide the avionics and other systems that let airplanes fly. They are also both large players in the climate control business. Given their respective market shares, any combination would be expected to face a significant anti-trust review not just in the U.S., but in Europe as well.
A spokesman for Honeywell has not returned calls and a spokesman for United Technologies declined comment.
David Faber | @DavidFaber
[2/22/2016]
http://www.cnbc.com/2016/02/22/hone...adline|headline|story&par=yahoo&doc=103407867
Aerospace giants Honeywell and United Technologies have recently held talks about a merger that would create a $94 billion sales colossus, according to people familiar with the situation.
The discussions occurred within the last two weeks and were focused on a deal in which Honeywell offered a premium, largely in stock with some cash, for the smaller united technologies.
Shares in United Technologies jumped on the news.
There is no assurance that the talks will lead to a deal. There are significant concerns on the UTX side over whether any combination can pass an anti-trust review, given the two companies provide so much of what goes into an airplane and would likely face opposition from the likes of Boeing and Airbus.
It is therefore unclear whether Honeywell, which initiated the latest talks, will emerge with a deal. The current talks represent the latest engagement in an on-again-off-again courtship that began almost one year ago and has changed shape as the respective market caps of the two companies have diverged.
Earlier last year, when UTX was larger in value than Honeywell, UTX CEO Greg Hayes approached his counterpart at Honeywell, David Cote, about the possibility of merging the two companies. Those discussions centered on a deal that represented a merger of equals, but would have had UTX management in control, according to people close to the conversations. Those talks broke down when United Technologies' stock price suffered significant declines and the two companies found themselves unable to agree on who would be in control of the combination.
Last fall, Honeywell turned the tables and approached UTX about a deal. The so called "bear hug" letter that was sent to UTX offered its holders a slight premium for their shares, but was structured as a merger of equals, sources said. That proposal was turned down by UTX last October, which cited concern about anti-trust risk as the key impediment. Honeywell decided against making the proposal public and the two companies had no contact for the months that followed.
But as Honeywell's stock outperformed UTX and its market value grew to be roughly $10 billion more than UTX, it was emboldened to try again. In recent weeks, Cote presented a new cash and stock proposal that would provide a premium to UTX holders. The exact terms of the proposal could not be determined, but given their respective sizes, any combination would end up with roughly equal ownership of a combination.
The industrial logic of a combination has been a focus of current and previous managements at both companies. In October of 2000, UTX was close to a deal to buy Honeywell — only to watch that deal trumped by an offer from GE, which after opposition from EU regulators found itself unable to close the transaction.
The two companies are leaders in aviation and aerospace, where UTX's Pratt & Whitney makes aircraft engines and both companies provide the avionics and other systems that let airplanes fly. They are also both large players in the climate control business. Given their respective market shares, any combination would be expected to face a significant anti-trust review not just in the U.S., but in Europe as well.
A spokesman for Honeywell has not returned calls and a spokesman for United Technologies declined comment.
