UTC confirms $30bn deal to buy Rockwell Collins

United Technologies (UTC) has confirmed that it has reached a deal to acquire Rockwell Collins in a $30 billion cash and shares transaction that will cement its place as one of the world’s largest aerospace suppliers.

UTC says in a statement that it will pay Rockwell Collins shareholders $93.33 per share in cash and $46.67 in UTC shares for each of the target company’s shares. That values Rockwell’s total equity at $23 billion, and the overall transaction at $30 billion – including the assumption of its net debt.

UTC adds that it will fund the transaction through debt issuances and cash on hand, while “the company is committed to taking actions to maintain strong investment grade credit ratings”.

The transaction is set to close in the third quarter of 2018, subject to approval from Rockwell’s shareholders and regulatory approvals.

"This acquisition adds tremendous capabilities to our aerospace businesses and strengthens our complementary offerings of technologically advanced aerospace systems," said UTC chairman and chief executive Greg Hayes.

"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."

Rockwell chairman, president and chief executive Kelly Ortberg welcomed the acquisition, saying that it bore testimony to the value that the company has been able to create.

"The combination [with UTC] will enable us to compete more effectively for future business through continued investments in innovation, world-class integrated product offerings and the ability to retain the top talent in the industry,” he adds.

Once the deal is complete, Rockwell Collins will be reorganised under UTC as Collins Aerospace Systems, which will be led by Ortberg. Dave Gitlin will serve as the unit’s president and chief operating officer.

On a pro-forma basis, the merged company is expected to have annual sales this year of $67 billion to $68 billion, with cost synergies of more than $500 million per annum to kick in four years after integration.

"Once we have completed the integration of Rockwell Collins and made progress towards reducing leverage back to historical levels, we will have an opportunity to explore a full range of strategic options for UTC," adds Hayes.

UTC owns engine manufacturer Pratt & Whitney and aircraft systems and sensors specialist United Technologies Aerospace Systems. That unit was formed through the merger of Goodrich and Hamilton Sundstrand in 2015.

Rockwell Collins is one of the world’s largest suppliers of avionics for military and civil aircraft, and in the last decade has expanded into aircraft connectivity and interiors through the acquisitions of Arinc and B/E Aerospace.

Both companies are major suppliers to Airbus, Boeing and other aircraft manufacturers.