United Tech CEO Defends Rockwell Deal -- 5th Update
05 Septiembre 2017 - 7:02PM
Noticias Dow Jones
By Doug Cameron and Thomas Gryta
Boeing Co. on Tuesday raised concerns about United Technologies
Corp.'s proposed takeover of Rockwell Collins Inc., threatening to
cancel some contracts with the suppliers if the combination
undermines competition in the aerospace supply chain.
A day after the $23 billion deal was made public, Boeing said it
was "skeptical" the transaction would benefit its airline customers
or the broader industry. "We would intend to exercise our
contractual rights and pursue the appropriate regulatory options to
protect our interests," the aircraft maker said in a statement.
In buying Rockwell, United Technologies is betting it can foster
the industry's creation of the fully digital airplane. Aerospace
companies are investing heavily to connect everything from engines
and brakes, and even coffee pots, using sensors to guide them on
when to schedule maintenance or replacements.
Such repairs have long been the most profitable part of the
aircraft industry, prompting efforts by Boeing, Airbus SE and
others to secure a larger slice of the business, moves potentially
threatened by United Technologies' move on Rockwell Collins.
"It gives us the opportunity to do things that we wouldn't be
able to do on our own," said United Technologies Chief Executive
Greg Hayes on a Tuesday conference call. The combination with
Rockwell Collins, he said, will make it easier to meet demand for
digital offerings and integrate aircraft systems, with benefits
like reducing overall weight.
United Technologies is already the world's largest aerospace
supplier, with almost $30 billion in sales this year split evenly
between engine maker Pratt & Whitney and UTC Aerospace Systems,
which makes everything from landing gear to the motors that control
wing flaps.
Rockwell Collins would add another $9 billion in annual sales
derived from its business of cockpit controls and communication
equipment and this year's purchase of B/E Aerospace, the biggest
provider of aircraft seats. Rockwell also makes the sensors and
communication systems that allows for real-time tracking of those
products' performance and the need for maintenance.
Shares of Rockwell Collins rose slightly on Tuesday to $131,
well below United Technologies' $140 offer and Rockwell's recent
highs. Customer opposition and the potential of antitrust action
given the sheer scale of the proposed deal -- rather than product
overlap -- still leaves some question marks, analysts said. The
deal is expected to close by the third quarter of 2018, after
regulatory and competitive concerns are reviewed. Shares of United
Technologies fell 5.7% to $111.21.
Mr. Hayes said the companies will have to work with customers
that have change-in-control clauses in their contracts, but played
down the risks. "We don't see anything that will stop this
transaction from happening," he said.
Credit Suisse analysts gave the deal an 80% chance of closing,
mostly because of the lack of major overlaps, even with Boeing
pushing against the takeover.
Both Airbus and Boeing privately lobbied last year against plans
by Honeywell International Inc. to acquire United Technologies,
according to people familiar with the situation. However,
Honeywell's $15 billion aerospace unit had far more product overlap
with United Technologies.
Rockwell Collins CEO Kelly Ortberg would become head of a new
United Technologies unit, Collins Aerospace systems, with annual
sales of $23 billion, heft that some believe will unsettle Airbus
and Boeing.
"This may greatly concern aircraft [makers] such as Airbus and
Boeing as they confront an ever increasing proportion of their
supply chain controlled by a single supplier," said Stephen Perry,
managing director at Janes Capital Partners, a boutique aerospace
investment bank.
On Tuesday, Mr. Hayes was already working to ease such worries.
He noted the lack of overlapping products in the combination and
said it would help cut costs for customers.
The projected cost savings from the takeover is net of any
concessions made to customers, Mr. Hayes said. "We have factored in
the fact that the customers will be looking for cost
reduction."
There wasn't any discussion of the potential deal with customers
before its announcement, according to a person close to the deal,
but Airbus had publicly expressed concerns that United Technologies
might take its eye off the ball as a key Airbus supplier.
An Airbus spokesman said the aircraft maker hopes "this M&A
will not distract UTC from their top operational priority," which
is delivering a new generation of Pratt & Whitney engines.
United Technologies' Pratt & Whitney division has struggled
with production and reliability of its new geared turbofan jet
engine that powers Airbus A320neo single-aisle planes. Efforts to
fix the shortcomings have encountered repeated delays, and some
analysts warned that the demands of integrating Rockwell Collins
could aggravate the problem. Airbus plane deliveries this year are
running behind because of a dearth of engines, but United
Technologies officials have said they expect the problems to be
resolved this year and commitments to be met for engine
deliveries.
--Robert Wall contributed to this article.
Write to Doug Cameron at doug.cameron@wsj.com and Thomas Gryta
at thomas.gryta@wsj.com
(END) Dow Jones Newswires
September 05, 2017 19:47 ET (23:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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