United Technologies' businesses include Pratt & Whitney, where delays and glitches have plagued stepped-up production of a new jet engine.

United Technologies Opens Door to Possible Breakup in Echo of GE

Feb. 22, 2018
UTC is taking a fresh look in the mirror as its aerospace operations are poised for a substantial overhaul from a blockbuster merger with Rockwell Collins.

United Technologies Corp. is taking a page from General Electric Co. and considering a breakup once thought to be unlikely.

The manufacturer is studying a plan to split up a portfolio that includes jet engines, elevators and air conditioners, Chief Executive Officer Greg Hayes said Wednesday at an investor conference. A decision will be announced by the end of the year, he said.

“Is UTC a more valuable property together or is UTC better off in three separate businesses?” Hayes said at a Barclays conference in Miami. “That’s the question for the board. That’s the question we continue to study.”

The comments mark a shift for Hayes, who has previously downplayed questions about whether the company would separate its operations. United Technologies becomes the latest industrial conglomerate to explore such a move after GE said it may break out its primary businesses into publicly traded companies.

United Technologies is taking a fresh look in the mirror as its aerospace operations are poised for a substantial overhaul from a blockbuster merger with Rockwell Collins Inc. as well as stepped-up production of a new jet engine at Pratt & Whitney that has been plagued by delays and glitches.

Any portfolio change would come after the company completes the Rockwell deal, slated to close this year.

Shares of United Technologies advanced 2.2% to $129.26 in New York Wednesday, giving the company a market value of $103 billion. The stock has risen 4.1% in the past three years, compared with a 28% gain for the S&P 500 Index.

In the event of a split, Hayes said he sees an aerospace business with about $45 billion to $50 billion in sales. The Otis elevators operation would have about $12 billion to $13 billion, while the climate-control division, which makes Carrier air conditioners, would have $17 billion to $18 billion.

A breakup could result in “significant dis-synergies” when splitting shared services such as payroll processing or tax management, the CEO said.

While United Technologies hasn’t been the target of a public activist campaign, analysts have said it’s a potential candidate. Barclays analyst Julian Mitchell said in a Feb. 14 note that the Farmington, Conn.-based company was one of the likeliest targets, along with Eaton Corp. and Johnson Controls International Plc.

At an investor meeting last May, Hayes said he thought of himself as his own activist. While he said at the time that a breakup wasn’t under consideration, he left the possibility open, saying “we’ll keep the portfolio together until we don’t.”

By Richard Clough

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