Market Overview

Honeywell Could Benefit From UTX-Rockwell Collins Combination

Honeywell Could Benefit From UTX-Rockwell Collins Combination

United Technologies Corporation (NYSE: UTX)'s $30 billion acquisition of Rockwell Collins, Inc. (NYSE: COL) will result in the combination of an aerospace giant.

At first glance, this might be seen as a negative for rival Honeywell International Inc. (NYSE: HON), which also operates in the aerospace sector, but this isn't necessarily the case.

Rockwell Collins as a start-alone company is a more formidable competitor to Honeywell than it will be under the United Technologies' umbrella, Larry Bossidy, Honeywell's former CEO explained on CNBC Wednesday. Aerospace customers don't like mega-large suppliers, which makes the merger a positive for Honeywell, albeit indirectly.

"I think they will be the recipient of more business because big customers like Boeing Co (NYSE: BA) are going to be concerned about the size and the potential power of the newly formed UTC," Bossidy said, while acknowledging "maybe" he is just being a cheerleader for his former company.

What UTC Was Thinking

Part of the reason why United Technologies is interested in Rockwell Collins is to compensate for other business units, Bossidy said. For example, the company's elevator unit Otis generates a good amount of cash but is experiencing no growth as opposed to the aerospace sector, which it believes will be an area of growth for the next decade.

Acquiring Rockwell Collins makes United Technologies more of an aerospace company and less of an industrial company, although at a "huge price."

"A lot of people were surprised by the price," Bossidy said. "It's a big price at 17 times EBITDA and it includes debt. They paid dearly for it."

Related Links:

Boeing, Airbus, Analyst Question United Technologies-Rockwell Collins Deal

What Analysts Expect From The United Technologies-Rockwell Collins Merger

Posted-In: aerospace CNBC Larry Bossidy Squawk BoxLong Ideas M&A Media Trading Ideas Best of Benzinga


Related Articles (BA + COL)

View Comments and Join the Discussion!

Cisco's Potential Upside Prompts A Buy Rating From Vetr

Mid-Day Market Update: Trivago Drops On Weak Outlook; Verastem Shares Surge