Rockwell Collins, United Technologies Set $695 Million Breakup Fee

Rockwell Collins Inc. agreed to pay a breakup fee of $695 million to United Technologies Corp. if their proposed $23 billion tie-up falls apart.

Rockwell Collins, a Cedar Rapids, Iowa-based airplane-parts maker, would be obligated to the payout if it accepted a higher acquisition offer or under certain other circumstances, according to a merger agreement filed with the Securities and Exchange Commission. Industrial conglomerate United Technologies, however, wouldn't owe Rockwell anything if the deal falls apart, nor would either company if regulators block it.

The proposed deal, announced by the companies on Monday, is the biggest ever in the aerospace industry. Analysts generally expect it to be cleared because the two companies make different airplane parts, but there may be hurdles along the way by customers like Boeing Co. and Airbus SE who depend on the merging companies for parts and services.

United Technologies and Rockwell executives have acknowledged those concerns but expressed confidence in the deal and that the merger wouldn't disrupt production or harm competition.

Apart from regulatory approval in 17 jurisdictions, the deal requires a vote by Rockwell shareholders, with analysts noting the $140-a-share offer was lower than many expected. The deal, expected to close by the third quarter of next year, isn't contingent on United Technologies shareholder approval.

RBC Capital analyst Matthew McConnell said Thursday that there are concerns that the concessions Rockwell and United Technologies would likely make to appease customers could eat into the benefits of the deal.

"The total size of the combined business could potentially be of interest to antitrust authorities, or at least slow down completion of the deal," Mr. McConnell said. "The limited direct product overlap does not ensure a smooth close."

Doug Cameron contributed to this article.

Write to Thomas Gryta at thomas.gryta@wsj.com

(END) Dow Jones Newswires

September 07, 2017 12:38 ET (16:38 GMT)