United Technologies Corp to buy Rockwell Collins for $23 bn
05 September 2017
United Technologies Corp will buy Rockwell Collins Inc for about $23 billion, creating an aerospace giant that can supply all parts for jetliners and warplanes from tip to tail.
The transaction, one of the biggest in aviation history sees the emergence of a parts supplier having a better negotiating capacity vis-a-vis planemakers Boeing Co and Airbus SE for pricing discounts and higher output, according to commentators.
The emergent company will be able to better supply a wide range of products for commercial aircraft, from Rockwell Collins's touchscreen cockpit displays to jet engines made by the Pratt & Whitney division of United Technologies.
''This is a significant deal for UTC and the aviation industry in general,'' Hans Weber, president of San Diego-based consultancy Tecop International Inc, said in an email. With the acquisition of Rockwell Collins, which delivers avionics systems for the US planemaker's 787, ''UTC becomes a critically important supplier to Boeing and will have a strong negotiating position as Boeing is putting price pressure on suppliers.''
The companies said in a statement yesterday that Rockwell Collins shareholders will get $140 a share in cash and stock. The deal works out to an 18-per cent premium to Rockwell Collins' closing level on 4 August, before the deal talks were reported by Bloomberg News.
''This acquisition adds tremendous capabilities to our aerospace businesses,'' Greg Hayes, chief executive officer of United Technologies, said in a statement. The company will develop technologically advanced equipment to make aircraft ''more intelligent and more connected.''
The combined company would have annual sales of around $34 billion, making it the world's fourth-largest aerospace firm by revenue after Boeing, Airbus and Lockheed Martin, according to industry website Flight Global, with a market of $115 billion that would exceed that of both Airbus and Lockheed.
According to commentators, with fierce competition, along with massive delays and cost overruns at aircraft programmes like Boeing's 787 Dreamliner and Airbus's A380 – planemakers are aggressively seeking cost cuts from suppliers.
"Both Boeing and Airbus have been very active in trying to reduce the costs in their supply chains, and have been looking to smaller suppliers to build leverage over these larger ones," said Ellis Taylor, Asia finance editor for Flight Global, CNN Money reported.