An aerospace industry analyst said United Technologies Corp.’s potential acquisition of Iowa’s Rockwell Collins will provide distinct benefits for both companies and is a good fit for the sector.
“For UTC, the deal would fill out a portfolio of aerospace capabilities that can be applied to both the commercial and military segments of the market, ” said Loren Thompson, an aerospace analyst with the Lexington Institute, an Arlington, Va.-based public policy research center focused on the defense industry and logistics.
“Rockwell Collins is a second-tier player,” he said Wednesday. “Although they have been trying to grow in order to make it into the first tier, they need substantial financial backing. UTC would provide that. Rockwell’s radios and other products could be sold more easily through UTC networks and with UTC financial backing.”
On Tuesday, the Wall Street Journal reported that Farmington-based UTC, which is parent to jet-engine maker Pratt & Whitney, Otis Elevators, and air conditioner maker Carrier Corp., is close to acquiring aviation systems and cabin equipment maker Rockwell Collins for $20 billion.
A deal could be reached by the Labor Day holiday weekend, media sources said.
Thompson says the trend in the aerospace sector is toward consolidation, because “if you’re not really big in the global market it is increasingly difficult to compete.”
He said he doesn’t think the deal with pose antitrust issues because UTC is not already engaged in the product lines it would be buying.
Asked if UTC could split instead of remaining diversified as a company as a result of such an acquisition, Thompson said: “This does raise an interesting question about how UTC might be organized in the future because aerospace looks poised to dominate its portfolio. … I think UTC is better off remaining an industrial conglomerate rather than splitting because you want strong cash flow no matter where the business cycle is.”
