United Technologies Seeks Elevator Deals to Boost Otis Unitby
‘There remains an opportunity for consolidation,’ CEO says
Hayes says Boeing, Airbus would oppose big aerospace purchases
United Technologies Corp. is looking for acquisitions to build out the Otis elevator business as the company sees opportunity to lead consolidation in the market.
While large deals may be difficult, Otis could boost market share through transactions similar to its recent purchase of Schindler Holding AG’s Japan business, United Technologies Chief Executive Officer Greg Hayes said. He didn’t mention how much money the company is willing to spend in the elevator market.
“There remains an opportunity for consolidation, obviously, in the elevator manufacturing space,” Hayes said in a presentation Tuesday at the Electrical Products Group conference in Longboat Key, Florida. “We would always look to make elevator acquisitions.”
United Technologies is seeking growth as it faces a variety of headwinds, including a sluggish global economy and a strong U.S. dollar weighing on international sales. The company is rolling out a costly new jet engine in the Pratt & Whitney division, while Otis is facing a slowdown in Chinese construction.
Acquisitions may supplement organic sales growth of 4 percent to 5 percent a year through 2020 at Otis, United Technologies said, repeating a previous forecast. Revenue might grow as much as 5 percent in its climate, controls and security division, 7 percent in the aerospace parts business and more than 10 percent in Pratt.
While United Technologies will look for acquisitions in other business lines, there are challenges in non-elevator markets, including high prices in the building-controls industry, Hayes said. On the aerospace side, there are opportunities in the $3 billion to $5 billion range, but resistance from customers including Boeing Co. and Airbus Group SE is a hurdle to larger transactions, he said.
“Boeing and Airbus do not want us to get significantly bigger to have more market power,” Hayes said. “If you can’t convince Boeing and Airbus that a big deal is in their best interest, I think you’re going to have a really hard time doing a big aero deal.”
United Technologies in February rebuffed a $90 billion merger offer from Honeywell International Inc. after Hayes said such a tie-up would run afoul of antitrust regulators and generate pushback from customers.