Bernstein: Honeywell-United Technologies Merger 'Unlikely'

Bernstein’s Steven E. Winoker maintained an Outperform rating and a price target of $122 for Honeywell International Inc. HON, while maintaining a Market-Perform rating and a price target of $104 for United Technologies Corporation UTX.

Press reports suggest continued merger talks between Honeywell and United Technologies over the past two weeks. Honeywell is reported to be offering a premium in a share and cash deal for United Technologies.

The basis of a merger between the two companies seems “surprising,” analyst Steven Winoker commented. He mentioned that Honeywell is now a “highly performing operating company” and there is significant overlap between the aerospace systems businesses, which could result in “significant antitrust challenges.”

Within aerospace, there seems to be “limited value” in combining United Technologies’ engine business and Honeywell’s avionics business with the two companies' systems businesses.

“On the building systems side, there could be value in combining controls businesses, but we see no tangible value in the addition of Otis to HON's businesses outside the idea of smart converging building systems,” Winoker wrote.

There could be some potential synergies within the fire and security businesses as well as HVAC controls businesses of the two companies, the analyst mentioned, while adding, “We see a full merger here as unlikely given UTX management commentary and a difficult regulatory situation.”