Shares of United Technologies Corp (UTX) fell 4.5 percent in premarket trading on Thursday after the diversified U.S. manufacturer said it would pay $16.5 billion in cash for aircraft components maker Goodrich Corp (GR).

United Tech plans to cut its spending on share buybacks and other small deals over the coming years as it digests its biggest acquisition in a decade, executives told investors on a conference call.

The deal has been in works for some time, said United Tech Chief Executive Louis Chenevert.
"This is one that has been on the radar screen, and I think it's been in the works for over a year between Marshall and I," Chenevert said, referring to Goodrich CEO Marshall Larsen.

About three-quarters of the purchase will be funded with debt, with the balance coming from new stock issuance, United Tech executives said.

"This may result in a negative credit ratings outlook, but we do not expect a downgrade or material increase in interest expense," wrote Jeff Sprague of Vertical Research Partners, in a note to clients.

Shares of Goodrich were up 10.2 percent to $120.71, shy of the $127.50 offer price. United Tech fell to $71.49.

Hartford, Connecticut-based United Tech confirmed on Thursday it would issue about $4.6 billion in new shares to fund the deal, which it expects to be accretive to earnings by mid-2014, two years after it expects the deal to close, according to spokesman John Moran.

The world's largest maker of elevators will suspend share buybacks for the next year to protect its credit ratings and said that that JPMorgan Chase & Co (JPM) was leading a $15 billion loan package to fund the deal.

The acquisition can help United Tech build critical mass in new aircraft technology and plane services as civil demand rebounds. Goodrich is poised to grow as key commercial plane programs such as Boeing Co's (BA) 787 Dreamliner and upcoming Airbus A320neo ramp up production.