Acquisition of Rockwell Collins 'about growth,' more jobs

United Technologies scheduled a conference call for Tuesday morning to reveal more details of the new unit.

United Technologies Corp. has announced its intentions to buy aviation communications and electronics supplier Rockwell Collins Inc. for $23 billion in cash and stock.

By buying Rockwell Collins, UTC also could counter efforts by manufacturers that are seeking business in the lucrative aircraft maintenance and fix markets. That deal was seen by some observers as a sign that the commercial aircraft order cycle has passed its peak, raising the pressure on suppliers to reduce costs.

Rockwell Collins shareholders will receive US$140 a share in cash and stock, the companies said in a statement on Monday.

The purchase price values Rockwell Collins at $140 per share, a 17.6 percent premium to the company’s $119 price before Bloomberg first reported details of a potential offer from UTC on August 4. The Baa2 senior unsecured rating and Prime-2 short term rating as well as the stable ratings outlook of Rockwell Collins are unaffected at this time.

United Tech said it will rename the combined division Collins Aerospace Systems. Finally, ValuEngine upgraded shares of Rockwell Collins from a “hold” rating to a “buy” rating in a research report on Friday.

CEO Greg Hayes of UTC says that the company is now looking to produce more technologically advanced equipment to make safer and modern aircraft. “Together, Rockwell Collins and UTC Aerospace Systems will enhance customer value in a rapidly evolving aerospace industry by making aircraft more intelligent and more connected”.

The announcement comes about 10 months after Rockwell Collins announced its acquisition of B/E Aerospace, whose products can be found throughout the passenger cabins of Boeing and Airbus jetliners.

Pending regulatory and shareholder approvals and other closing conditions, the deal transforms UTC overnight into an aerospace system and subsystem giant in both government and commercial markets.

UTC expects the transaction to generate more than $500 million in cost synergies by the fourth year and to be accretive to the conglomerate’s adjusted earnings per share following the first full year. Following the news that it would be acquired, its market value rose by 9.8 percent while that one of United Technologies fell by 2.9 percent. It reaffirmed its 2017 profit estimates. Rockwell Collins, Inc. (NYSE:COL) has risen 16.15% since September 5, 2016 and is uptrending.

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