United Technologies Corp. to buy Rockwell Collins for $140 a share

The Dow Jones Industrial Average component, United Technologies Corp. (UTX) to buy Rockwell Collins Inc. (COL) for about $23 billion, to create an aerospace behemoth that can outfit warplanes and jetliners from tip to tail.

The transaction creates an aircraft-parts giant better positioned to withstand the squeeze from planemakers Boeing Co. and Airbus SE for pricing discounts and higher output.

Under the terms of the agreement, each Rockwell Collins share owner will receive $93.33 per share in cash and $46.67 in shares of United Technologies common stock, subject to a 7.5% collar centered on United Technologies’ August 22, 2017 closing share price of $115.69.

United Technologies 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 projected to close by Q3 of 2018, subject to approval by Rockwell Collins’ share owners, as well as other customary closing conditions, including the receipt of required regulatory approvals. The purchase price implies a total equity value of $23B and a total transaction value of $30B, including Rockwell Collins’ net debt.

The combined company will boast a broad suite of products for commercial aircraft, from Rockwell Collins’s touchscreen cockpit displays to jet engines made by the Pratt & Whitney division of United Technologies.

United Technologies said it will combine its aerospace business with Rockwell Collins in a new unit named Collins Aerospace Systems. Rockwell Collins Chief Executive Officer Kelly Ortberg will head the division, while Dave Gitlin, who currently runs UTC Aerospace Systems, will serve as president and chief operating officer.

United Technologies is increasing its bet on aerospace, where it has stumbled recently with the rocky rollout of a new jet engine that cost $10 billion to develop. The market accounts for about half of sales at the company, with the rest coming from elevators, air conditioners and other building systems.

Rockwell Collins is already absorbing the largest acquisition in its history. The company earlier this year closed the acquisition of B/E Aerospace, adding deluxe jetliner seats, lavatories and galley equipment to a lineup of high-technology avionics products.

COL closed at $130.61.

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