M&A

Is a UTC-Rockwell Collins deal imminent?

Investors are zeroing in on the possibility that aerospace giants United Technologies and Rockwell Collins could agree to a merger "as soon as this weekend," as Dow Jones described the talks Tuesday.

Dow Jones pegs the enterprise value of a potential UTC acquisition of Rockwell at around $20.8 billion, or $140 per share. That follows a Friday report by StreetInsider.com that suggested a $145-$155 per share range, which implied a range of $23.5 billion-$25.2 billion.

Commercial aerospace market trends are driving the reported talks but a tie-up would also bring together two of the largest government suppliers. UTC is listed at No. 46 and Rockwell is at No. 48 on this year's edition of the Washington Technology Top 100 rankings of the largest prime contractors.

UTC does not individually break out government revenue in its financial reports, but the Farmington, Conn.-based company's CEO Gregory Hayes estimated that about 10 percent of total sales come from federal contracts in a December interview with CNBC's Jim Cramer. The company's Pratt & Whitney subsidiary makes the F-35 fighter jet's engine and the aerospace systems segment builds systems and components for military and space agencies, among others.

Rockwell Collins reported $2.2 billion in government systems segment revenue during its last fiscal year ended Sept. 30, 2016 to represent 41.2 percent of total sales over 12 months. The company's acquisition of airline cabin equipment maker B/E Aerospace late last year was slated to bring that share down to 25-30 percent based on pro forma figures.

Cedar Rapids, Iowa-based Rockwell Collins provides communications, navigation, avionics and other types of electronics to the U.S. military and other agencies. The company's information management services segment also includes the Federal Aviation Administration as a customer.

Shares in Rockwell Collins spiked 2 percent in morning trade to a new 10-year high. United Technologies' stock also gained as much as 2 percent during Tuesday's session.

About the Author

Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at rwilkers@washingtontechnology.com. Follow him on Twitter: @rosswilkers. Also find and connect with him on LinkedIn.

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