United Technologies Could Hit $120 On Honeywell Deal, But Selling The Move Makes Most Sense

Shares of United Technologies Corporation UTX could hit $120 on its potential deal with Honeywell International Inc. HON, but rational investors should sell United Tech if a deal does or does not happen, according to Deutsche Bank analyst Christopher Mcdonagh.

Honeywell said it has offered to buy United Technologies for about $90.7 billion, or $108 a share. The offer represents a 22 percent premium to United Tech's closing price on February 19, the last trading day before the talks were made public.

Related Link: A Honeywell-United Tech Merger Makes Sense, If The Offer Is $115 Or Higher

"If the intent of HON is to truly get larger, then this deal is extremely low prob = sell UTX. If the intent is to 'Merge­to­Break' then UTX is also prob a sell here [all emphases omitted]," Mcdonagh said in a note to clients.

"With UTX currently trading at $99, we are already pricing in a boosting of price to $120 to get deal done. So we would expect some monetization on this move. Sell the move," Mcdonagh added.

United Tech is the parent company of Pratt & Whitney jet engines, Otis elevators and Carrier air conditioners. Honeywell, among others, makes aircraft engines and thermostats.