Honeywell Kills $90 Billion Pursuit of United Technologies

  • Deal proposal was `full and fair offer,' Honeywell CEO says
  • Companies disagreed over antitrust risk of $108-a-share bid

Honeywell International Inc. ended its $90 billion pursuit of United Technologies Corp. over the target company’s unwillingness to discuss a combination of the aerospace giants.

Honeywell said it “strongly disagrees” with United Technologies’ argument that a tie-up would run afoul of antitrust regulators and generate customer resistance. A deal would have created value for investors by combining complementary portfolios, Honeywell said Tuesday in a statement.

“We made a full and fair offer that would have greatly benefited both sets of shareowners,” Chief Executive Officer David Cote said in the statement. “However, continuing to try to negotiate with an unwilling partner is inconsistent with our disciplined acquisition process.”

The announcement ends almost a year of discussions that spilled out in public last week. Despite resistance from United Technologies, Honeywell continued to press for a combination that would have created an aerospace and building-products behemoth with more than $90 billion in annual sales.

Appropriate End

“This is the appropriate outcome given the strong regulatory obstacles, negative customer reaction and the potential for a protracted review process that would have destroyed shareholder value,” United Technologies said in a separate statement.

United Technologies fell 1.6 percent to $95.05 at the close in New York. Honeywell rose 4.5 percent, the biggest gain in a month, to $105.87.

Honeywell, based in Morris Plains, New Jersey, had approached United Technologies on Feb. 19 with an offer of $108 a share, valuing the company at about $90 billion excluding debt. The proposal was the most recent in talks that began last April, United Technologies said last week.

United Technologies rejected the latest bid, saying it was too low and would face heavy opposition from antitrust regulators. In a presentation released last week, the Farmington, Connecticut-based company also cited public statements opposing the deal from large customers such as Airbus Group SE and Embraer SA.

Honeywell sells products including thermostats and cockpit voice recorders, while United Technologies’ key offerings include Otis elevators and Pratt & Whitney aircraft engines. Planemakers, which are large customers for both companies, have disproportionate influence in this type of deal and would attempt to stymie a tie-up that would give a combined Honeywell-United Technologies entity better pricing power, said Nicholas Heymann, an analyst with William Blair & Co.

“We understand on paper why this would have been particularly compelling. However, the world’s a rapidly changing place in the commercial aerospace sector,” he said. “That ultimately means the gatekeeper for any transaction here was the prime airframe manufacturers.”

Cote will address analysts and shareholders at a Honeywell investor conference Wednesday.

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