UTX United Technologies Corporation

   (FROM THE WALL STREET JOURNAL 3/2/16) 
   By Ted Mann 

Honeywell International Inc. pulled the plug Tuesday on its $90 billion bid for United Technologies Corp., a sign that Chief Executive Dave Cote won't go crazy trying to land a deal at any cost.

When Mr. Cote took the helm at Honeywell in 2002, it was grappling with a disastrous mergers-and-acquisitions track record, and he went out of his way to provide assurances he wouldn't go after big transactions for the sake of it.

"Don't worry, I have not lost my mind," he said in 2014, after pledging to spend $10 billion on deals over five years. "I am not going to blow the money."

Honeywell's pursuit of its larger rival threatened to test that promise, especially given United Technologies' vigorous opposition to the proposal. United Technologies said the deal could never pass muster with antitrust regulators and major customers like Airbus Group SE and Boeing Co., and that Mr. Cote's $108 a share offer wasn't high enough.

After two weeks of public battle, Mr. Cote folded ahead of an important meeting with investors Wednesday. Still, the company left open the possibility it could pursue a deal in the future, especially if United Technologies continues in its current rut or if shareholders pressure CEO Gregory Hayes to come back to the table. Honeywell's shares rallied 4.5% to $105.87 Tuesday, while United Technologies' stock fell 1.7% to $95.02.

"We remain confident that the regulatory process would not have presented a material obstacle to a transaction," Honeywell said in a news release. But "continuing to try to negotiate with an unwilling partner is inconsistent with our disciplined acquisition process."

United Technologies said Honeywell's decision to walk away "is the appropriate outcome given the strong regulatory obstacles, negative customer reaction and the potential for a protracted review process that would have destroyed shareholder value."

Talks between the industrial giants began last year when United Technologies approached Honeywell about a combination, according to people familiar with the matter, but the companies have been unable to agree on key points.

At its investor meeting Wednesday, Honeywell will steer the focus back to its track record over the 14 years of Mr. Cote's tenure. In that period, the New Jersey-based conglomerate has been revived after its failed attempt to sell itself first to United Technologies in 2000 and then General Electric Co. -- the latter of which foundered on antitrust concerns in 2001 when it was blocked by European regulators.

Mr. Cote and his management team set about fixing what he has since described as a broken and unaccountable deals process.

The company went on to earn back the love of Wall Street analysts with a string of small-bore, carefully considered deals that grew the company into a broad variety of markets in which it holds dominant positions. The company now makes products ranging from oil refining catalysts and thermostats to fishing boots and Wi-Fi systems for business jets.

But while analysts have peppered Mr. Cote and his deals team with questions about when they would go bigger, the company has always been careful about overreach. The United Technologies bid had some investors worried. Barclays analyst Scott Davis wrote Tuesday that some shareholders feel Mr. Cote "is stretching too far on this one, and too late in his career."

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Joann S. Lublin contributed to this article.

(END) Dow Jones Newswires

March 02, 2016 02:47 ET (07:47 GMT)

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