United Technologies Corporation (UTC) has just bought Rockwell Collins Incorporated for $140 a share, two-thirds payable in cash and one-third in stock. UTC’s chief executive officer Gregory Hayes approached Rockwell Collins’ CEO Robert K. Ortberg in January about the acquisition, starting a long negotiation that would last for the better part of the year.
On January 23, Hayes first contacted Ortberg, but the initial attempt proved fruitless. Rockwell Collins had purchased B/E Aerospace at the end of 2016, and was focused on closing that deal. Ortberg requested that UTC not pursue the issue until completion of the acquisition. Honoring the agreement, Hayes approached Ortberg again in April, five days after Rockwell Collins completed its acquisition of B/E Aerospace. A meeting was finally set up for May 2nd.
UTC’s initial proposal outlined ownership of most of the partnership with Ortberg as CEO. Rockwell Collins rejected the offer, but agreed to continue negotiations.
In June, UTC offered a 70-30 division of shareholders, giving UTC the majority. The offer was rejected due to structure complexity and lack of control by Rockwell Collins shareholders.
In July UTC offered $130 a share, then $135, both proposals which Rockwell Collins declined.
On August 22nd, UTC upped the offer to $139, to which Rockwell Collins proposed a counteroffer of $141 in cash or $144, payable 70% in cash and 30% in UTC stock. The companies finally agreed to $93.33 per share in cash and $46.67 in shares of UTC common stock, subject to a 7.5 percent collar centered on UTC’s August 22, 2017 closing share price of $115.69.
Two unidentified companies also approached Rockwell Collins to negotiate a possible deal, which did not deter UTC. Both companies abandoned pursuit.
UTC expects the combination will be accretive to adjusted earnings per share after the first full year following closing and generate an estimated over $500 million of run-rate pre-tax cost synergies by year four.
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