UTC Touts $23 Billion Deal As Stock Drops, Boeing Turns Critic
Investors and Boeing Co gave two thumbs down on Tuesday to aerospace and industrial company United Technologies Corp $23 billion plan to buy avionics maker Rockwell Collins Inc.
The acquisition, announced on Monday, would be the largest in aerospace history and create a new player in the top echelon of suppliers to Boeing, Airbus, Bombardier and other plane makers.
United Tech shares were down 5.2 percent after Boeing said it would and use the power granted by its contracts with the companies, and its sway with regulators, “to protect our interests.”
The stock had fallen more than 4 percent before Boeing’s statement, as analysts factored in United Tech’s decision to halt share buybacks for three to four years and earnings dilution caused by the cash-and-stock deal. Analysts expected $2 billion in buybacks in the second half of 2017 alone.
The loss of years of buybacks and Boeing’s unusual blowback came as plane makers are pressing United Tech and other suppliers for price cuts and trying to compete against them on high-margin services and spare parts.
By making more of the components used on each Boeing and Airbus SE aircraft, analysts say, United Technologies-Rockwell Collins would gain leverage to resist that pressure.
United Tech Chief Executive Greg Hayes, who would lead the combined company, brushed aside Boeing’s concerns.
“The whole idea of this deal is to be able to drive more innovative solutions at lower cost for our customers – both the (plane makers) and the airlines,” Hayes told Reuters on Tuesday, shortly before Boeing issued its criticism.