United Technologies Announces
Intention to Separate Into Three Independent Companies;
Completes Acquisition of Rockwell Collins
November 26, 2018
Upon separation, each company will
have the strategic focus and financial flexibility to
deliver innovative customer solutions and drive
long-term value
Completion of Rockwell Collins
acquisition creates an industry-leading aerospace
systems supplier, Collins Aerospace Systems
Anticipates acquisition to be $0.15
to $0.20 accretive to adjusted earnings per share in
2019
Announces intention to separate
United Technologies ("UTC") into three independent
companies
Following portfolio separation, UTC
to operate as a leading aerospace company comprised of
Collins Aerospace Systems and Pratt & Whitney businesses
Otis and Climate, Controls &
Security ("CCS") businesses to become independent
companies; CCS will be renamed Carrier
Tax-free separation to UTC
shareowners for U.S. federal income tax purposes
expected to be completed in 2020
Investor conference call at 8:00
a.m. ET, Tuesday, November 27, listen live at
www.utc.com
FARMINGTON, Conn., Nov. 26, 2018
/PRNewswire/ -- United Technologies Corp. (NYSE: UTX)
today announced the completion of its acquisition of
Rockwell Collins (NYSE: COL) and the company's intention
to separate its commercial businesses, Otis and Carrier
(formerly CCS), into independent entities. The
separation will result in three global, industry-leading
companies:
United Technologies, comprised of
Collins Aerospace Systems and Pratt & Whitney, will be
the preeminent systems supplier to the aerospace and
defense industry; Collins Aerospace was formed through
the combination of UTC Aerospace Systems and Rockwell
Collins;
Otis, the world's leading
manufacturer of elevators, escalators and moving
walkways; and
Carrier, a global provider of HVAC,
refrigeration, building automation, fire safety and
security products with leadership positions across its
portfolio.
"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. "Our products make modern life possible
for billions of people. I'm confident
that each company will continue our proud history of
performance, excellence and innovation while building an
even brighter future. As standalone
companies, United Technologies, Otis and Carrier will be
ready to solve our customers' biggest challenges,
provide rewarding career opportunities, and contribute
positively to communities around the world."
Overview of Three Leading
Companies:
United Technologies (UTC)
United Technologies (NYSE: UTX),
comprising Collins Aerospace and Pratt & Whitney, will
be the preeminent systems supplier to the high-growth
commercial aerospace and defense industry, with a unique
portfolio of technologies and scale to invest through
economic cycles. 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.
Pratt & Whitney is a global leader in aircraft
propulsion with a growing number of engine programs
including the revolutionary Geared TurbofanTM commercial
engine and the F135 military engine for the F-35 Joint
Strike Fighter program.
Otis Elevator Company (Otis)
Otis Elevator Company is the
world's leading 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.
Founded 165 years ago, Otis has a history of
global leadership with products and services offered in
nearly every country in the world.
Otis, with more than two million elevators under
maintenance, has the largest aftermarket service
portfolio of any elevator manufacturer.
Recent investments include digitally-enabled
field service capabilities, positioning Otis for
continued growth.
Carrier
Carrier is a leading global
provider of innovative HVAC, refrigeration, fire,
security and building automation technologies with 2017
sales of $17.8 billion. Supported by
the iconic Carrier name, the company's portfolio
includes industry-leading brands such as Carrier, Kidde,
Edwards, LenelS2 and Automated Logic.
Carrier's businesses enable modern life, delivering
efficiency, safety, security, comfort, productivity and
sustainability across a wide range of residential,
commercial and industrial applications.
Through accelerated innovation, the company has
released more than 200 new products over the last two
years.
Separation Transaction Details
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. Each
spin-off is subject to the satisfaction of customary
conditions, including final approval by UTC's Board of
Directors, receipt of a tax opinion from counsel, the
filing and effectiveness of a Form 10 registration
statement with the U.S. Securities and Exchange
Commission and satisfactory completion of financing.
Gregory Hayes will oversee the
transition and will continue in his current role as UTC
Chairman and CEO following the separation.
The three independent companies
will be appropriately capitalized with the financial
flexibility to take advantage of future growth
opportunities. Each business will be
better positioned to pursue a capital allocation
strategy more suitable to its respective industry and
risk and return profile, and enjoy greater flexibility
with an independent equity currency and more
appropriately aligned management and employee
incentives. UTC's commitment to
strengthening its credit metrics remains unchanged.
Each independent company is expected to have a
strong balance sheet and to maintain an investment grade
credit rating. Any existing or
potential liabilities that are not associated with a
particular entity will be allocated appropriately to
each of the businesses.
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, UTC
expects to continue to pay a quarterly dividend of no
less than 73.5 cents per share.
One-time transaction costs are
expected to include non-U.S. tax expense, debt
financing, operational separation activities and other
customary items.
The separation is expected to be
completed in 2020, with separation activities occurring
within the next 18-24 months. There
can be no assurances regarding the ultimate timing of
the separation or that the separation will be completed.
Creating Collins Aerospace
UTC's acquisition of Rockwell
Collins is one of the largest in aerospace history.
It 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.
"Collins Aerospace brings together
two great companies with unmatched expertise in
developing electrical, mechanical and software
solutions," said Hayes. "We will have
a laser focus on developing innovative solutions for
customers and generating strong returns for
shareowners."
Financial Outlook
UTC updates its 2018 outlook to
include the acquisition of Rockwell Collins and now
anticipates:
Sales of $64.5 to $65.0 billion, up
from $64.0 to $64.5 billion;
Adjusted EPS dilution of
approximately $0.10 from the acquisition, resulting in
adjusted EPS of $7.10 to $7.20, down from $7.20 to
$7.30*;
Free cash flow of $4.25 to $4.5
billion, down from $4.5 to $5.0 billion*;
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, UTC anticipates the
acquisition to be $0.15 to $0.20 accretive to adjusted
EPS, including the estimated impact of approximately
$650 million of incremental intangible amortization
associated with the transaction. UTC
also expects $500 to $750 million of accretion to free
cash flow in 2019 from Rockwell Collins. The weighted
average diluted shares outstanding for 2019 is expected
to be approximately 872 million shares.
*Note: When we provide expectations
for adjusted EPS, organic sales and free cash flow on a
forward-looking basis, a reconciliation of the
differences between the non-GAAP expectations and the
corresponding GAAP measures generally is not available
without unreasonable effort. See "Use
and Definitions of Non-GAAP Financial Measures" below
for additional information.
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