M&A

Rumors come true; UTC makes $30B deal for Rockwell Collins

United Technologies Corp. has ended almost a month of investor and media speculation with a Monday announcement that it would acquire Rockwell Collins for almost $30 billion including the assumption of net debt.

Pending regulatory and shareholder approvals and other closing conditions, the deal transforms UTC overnight into an aerospace system and subsystem giant in both government and commercial markets. The companies expect to close the transaction by next year's third quarter.

UTC's aerospace business builds structures for fixed-wing and rotary aircraft and the company's Pratt & Whitney subsidiary makes military jet engines including those for the F-35 fighter. Rockwell Collins is a provider of avionics, flight controls, aircraft interior and data connectivity technologies to government and commercial entities.

Post-close, Rockwell Collins would be folded with the UTC aerospace segment to create a new business called Collins Aerospace Systems. The combined company would record $67 billion-$68 billion in annual sales, UTC said.

The future Collins Aerospace Systems business would generate one-fourth of its projected $23 billion sales from military customers, according to an investor presentation issued Tuesday. 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.

Approximately 10 percent of UTC's total revenue comes from federal contracts, its CEO Greg Hayes told CNBC in December. UTC reported $57.2 billion in sales last year.

Rockwell Collins posted $5.2 billion in revenue for its last fiscal year ended Sept. 30 with 41.2 percent of that in its government systems segment. The company expects to record $8 billion in revenue for its current fiscal year including acquired sales from B/E Aerospace.

The purchase price values Rockwell Collins at $140 per share, a 17.6 percent premium to the company's $119 price before Bloomberg first reported details of a potential offer from UTC on Aug. 4.

Of the deal's $30 billion enterprise value, UTC will pay $23 billion to purchase Rockwell Collins and assume $7 billion in net debt. UTC will borrow $15 billion to finance the deal.

Shares in Rockwell Collins closed at $130.61 on Friday and U.S. markets were closed Monday for Labor Day.

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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