United Technologies to buy Rockwell Collins in multi-billion dollar deal

United Technologies Chairman and CEO Greg Hayes

Rockwell Collins announced that its Board of Directors has approved a stock repurchase plan on Friday, July 7th that allows the company to buyback $200.00 million in outstanding shares.

Rockwell Collins shareholders will receive US$140 a share in cash and stock, the companies said in a statement on Monday.

Safran would look at any assets that might come up for sale as a result of United Technologies' planned $23 billion takeover of Rockwell Collins, the French company's chief executive said.

"Together, Rockwell Collins and UTC Aerospace Systems will enhance customer value in a rapidly evolving aerospace industry by making aircraft more intelligent and more connected", he added. Rockwell Collin's touchscreen displays will be teaming up with jet engines manufactured by the Pratt & Whitney division of United Technologies.

After buying Rockwell Collins that delivers avionics systems for the 787 plane-makers of the U.S., UTC will probably become the most significant supplier for the Boeing, and will also hold a strong position of negotiating as Boeing to put price pressure on suppliers.

When the transaction is completed - pending regulatory and shareowner approval - the companies will form a new business unit called Collins Aerospace Systems.

The company has said the deal complements UTC's current business. The price of $140 a share has risen to nearly 18% after the announcement making the whole deal worth $30 billion. The price represents an 18 per cent premium to Rockwell Collins' closing level on Aug 4, before Bloomberg News reported on the deal talks. Canaccord Genuity raised Rockwell Collins from a "hold" rating to a "buy" rating and increased their price target for the company from $108.00 to $125.00 in a research report on Tuesday, August 1st. The company had revenue of $2.09 billion during the quarter, compared to analyst estimates of $2.04 billion.

Hayes also knocked down speculation that the purchase would prompt United Tech to spin off its Carrier air conditioner or Otis elevator units, saying the company needs their cash flow to help pay down debt from the deal. In addition to sensor-equipped systems made by both companies, Collins's extensive communications services link aircraft with ground systems, from airports to operations control centers.

The two companies have said the deal would generate cost savings of at least $500 million by the fourth year. UTC was down 2.18 percent at $117.92 in premarket trading and Rockwell Collins was up 1.37 percent at $130.61.

Rockwell Collins stock was up 0.3% to $131.00, in a 52-week range of $78.54 to $131.17.



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