United Tech Nears Deal to Buy Rockwell Collins for More Than $20 Billion -- 2nd Update

By Dana Mattioli, Joann S. Lublin and David Benoit Features Dow Jones Newswires

United Technologies Corp. is nearing a deal to buy Rockwell Collins Inc. for more than $20 billion, a tie-up that would create one of the world's biggest aircraft-equipment makers.

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The companies are discussing a per-share price for Rockwell of $140 or less and could come to an agreement as soon as this weekend, according to people familiar with the situation. Rockwell shares closed at $127.99 Monday, giving the company a market value of $20.8 billion.

Rockwell shares rose on the news, first reported by The Wall Street Journal Tuesday, closing up 2.1% at $130.74 and giving the company a market value of about $21 billion. United Technologies, meanwhile, jumped 2.9% to $118.70, giving the industrial conglomerate a market value of about $95 billion. United Technologies investors cheered the likelihood that the company will be able to secure the deal without paying a higher price that some had expected.

As with all acquisition talks, it is possible these could hit a snag and not result in a deal, or the expected price could change.

Should the transaction happen, it would rank as the largest aerospace deal on record, eclipsing United Technologies' 2012 acquisition of Goodrich Corp. for about $16 billion, according to Dealogic. It would also be one of the five-biggest takeovers of the year, Dealogic data show.

The deal would boost United Technologies' business supplying Boeing Co. and Airbus SE as the aerospace industry ramps up for a new generation of jets. The company already owns one of the world's biggest jet-engine makers, Pratt & Whitney, part of an aerospace division that also makes parts such as wheels and landing gear.

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Rockwell specializes in cockpit displays and communications systems for passenger jets and military programs. In April, the Cedar Rapids, Iowa, company closed its roughly $6 billion acquisition of B/E Aerospace Inc., a maker of plane seats and interiors.

Since word of the talks surfaced this month, several analysts have said they don't expect significant antitrust issues, given that United Technologies and Rockwell make different airplane parts. But airplane manufacturers might voice concerns about any consolidation among their suppliers. Boeing and Airbus have also been nudging their way into aftermarket business to capture some of the profit from selling and servicing parts -- putting them on a collision course with suppliers.

The possibility of a United Technologies deal for Rockwell caught some analysts by surprise. In June, United Technologies Chief Executive Greg Hayes told analysts the Farmington, Conn., company was looking to spend roughly $1 billion on acquisitions this year. It had about $7 billion in cash.

"As far as bigger M&A, it's something we always look at, but I am reluctant to go out and pay some of the prices that we see today," Mr. Hayes said at the Paris Air Show.

Last year, United Technologies, which also makes Carrier climate control systems and Otis elevators, rebuffed unsolicited takeover approaches from Honeywell International Inc.

Merger activity has been somewhat tepid this year, as uncertainty around possible tax changes and other factors have kept companies on the sidelines. Deal volume in the U.S. so far stands at about $803 billion, down 14%, according to Dealogic.

Thomas Gryta contributed to this article.

Write to Dana Mattioli at dana.mattioli@wsj.com, Joann S. Lublin at joann.lublin@wsj.com and David Benoit at david.benoit@wsj.com

(END) Dow Jones Newswires

August 29, 2017 17:27 ET (21:27 GMT)