United Tech Plans To Separate Into Three Companies

(RTTNews) - United Technologies Corp. (UTX) said that it completed its acquisition of Rockwell Collins (COL), and it plans to separate its commercial businesses, Otis and Carrier--formerly CCS, into independent entities. The separation will result in three companies. They are United Technologies, Otis Elevator Company, and Carrier.

"Our decision to separate United Technologies is a pivotal moment in our history and will best position each independent company to drive sustained growth, lead its industry in innovation and customer focus, and maximize value creation," said United Technologies Chairman and Chief Executive Officer Gregory Hayes.

United Technologies, comprising Collins Aerospace and Pratt & Whitney, will be systems supplier to the commercial aerospace and defense industry. Combined sales of the two businesses totaled $39.0 billion in 2017 on a pro forma basis. Collins Aerospace supplies electrical, mechanical and software solutions across all major segments of the aerospace industry and serves commercial and military customers.

Otis Elevator Company is a manufacturer of people-moving products, including elevators, escalators and moving walkways, with significant recurring revenue from long-term maintenance contracts and $12.3 billion in 2017 sales.

Carrier is a provider of innovative HVAC, refrigeration, fire, security and building automation technologies with 2017 sales of $17.8 billion.

The proposed separation is expected to be effected through spin-offs of Otis and Carrier that will be tax-free for UTC shareowners for U.S. federal income tax purposes.

Gregory Hayes will oversee the transition and will continue in his current role as United Technologies Chairman and chief Executive Officer following the separation.

Following separation, the three companies together are initially expected to pay a quarterly dividend that is in sum no less than 73.5 cents per share, although each company's dividend policy will be determined by its respective Board of Directors following the completion of the separation. Until the planned transactions are completed, United Technologies expects to continue to pay a quarterly dividend of no less than 73.5 cents per share.

The separation is expected to be completed in 2020, with separation activities occurring within the next 18-24 months.

United Technologies said its acquisition of Rockwell Collins brings together Rockwell Collins and UTC Aerospace Systems to create Collins Aerospace Systems, an industry leader with a global presence of 70,000 employees in 300 sites and $23 billion in annual sales on a 2017 pro forma basis.

United Technologies expects the deal to be accretive to adjusted earnings per share in 2019 and to generate more than $500 million in run-rate pre-tax cost synergies by year four.

United Technologies updates its 2018 outlook to include the acquisition of Rockwell Collins and now anticipates Sales of $64.5 billion to $65.0 billion, up from the prior outlook of $64.0 billion to $64.5 billion; Adjusted earnings per share dilution of approximately $0.10 from the acquisition, resulting in adjusted earnings per share of $7.10 to $7.20, down from $7.20 to $7.30.

United Technologies noted that all outlook changes are related to the acquisition of Rockwell Collins. There is no change in the Company's previously provided 2018 expectations for organic sales growth of approximately 6 percent. For 2019, United Technologies anticipates the acquisition to be $0.15 to $0.20 accretive to adjusted earnings per share, including the estimated impact of approximately $650 million of incremental intangible amortization associated with the transaction. United Technologies also expects $500 to $750 million of accretion to free cash flow in 2019 from Rockwell Collins.