United Technologies Plans To Separate Into 3 Companies

Industrial giant, United Technologies is separating its aerospace, elevator and air-conditioning businesses into three individual entities and expects completion by 2020. The company will split into United Technologies, Otis and Carrier.

United Technologies recently completed its acquisition of aircraft parts maker Rockwell Collins and will be combining it with UTC Aerospace Systems to form Collins Aerospace Systems which will then be under the United Technologies company after the split.

Otis, which manufactures elevators will be a second company, while Carrier, producing a number of products related to HVAC and refrigeration, will be the third company.

United Technologies Chairman and CEO Greg Hayes said in an interview to CNBC recently that each company will be better positioned after the split.

“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,” Hayes said.

Hayes will remain as Chairman and CEO of United Technologies while overseeing the split. In an investor call on Tuesday, Hayes talked about how the split will unlock value for shareholders. That may take some convincing as its stock fell 4 percent on Tuesday.

The split up of United Technologies into three companies was urged by the activist investor, Dan Loeb as previously reported by CNBC in September. In a letter by Loeb’s Third Point hedge fund, to United Technologies in April, he suggested the 3-way split and also disclosed the hedge fund’s “significant stake” in United Technologies.

Responding to the letter, the company said, “It disagrees with several of the assertions contained in the Third Point letter” but “is always open to the input of shareholders.”

This 3-way split also comes after China gave key antitrust approval to United Technologies’ $23 billion acquisition of Rockwell Collins which is the largest deal in aerospace history.

The combined revenues of Rockwell Collins and United Technologies brought in nearly $67 billion last year. The combos financial update for 2018 is expected to be near $65 billion leading to an expected 10-cent impact on earnings per share with forecasted adjusted earnings between $7.10 a share and $7.20 a share for United Technologies, the company said.

United Technologies expects between a 15 to 20 cent contribution by Rockwell Collins to its adjusted full-year earnings per share for fiscal 2019.

Evercore and Goldman Sachs have been secured as financial advisors, while Wachtell, Lipton, Rosen and Katz have been retained as legal advisors for the company, reports United Technologies.