United Technologies Corp. announced late Monday it will buy aerospace manufacturer Rockwell Collins Inc. for $30 billion, making another big bet on the aviation business just five years after bulking up with its purchase of Goodrich Corp.
The deal is one of the biggest in aerospace and would equip planes with a vast array of parts and components, including wing flaps, brakes systems, cockpit controls and lighting and cooling systems.
The combined company is expected to generate revenue of $67 billion to $68 billion, with $23 billion from aerospace sales. UTC posted revenue of about $57 billion last year, with about $29 billion from its aerospace businesses: jet engine maker Pratt & Whitney in East Hartford and aerospace parts manufacturer UTC Aerospace Systems, or UTAS, in Windsor Locks.
The deal, valued at $140 a share in cash and UTC stock, is expected to close in the third quarter of 2018, subject to the approval of Rockwell Collins shareholders.
UTC, based in Farmington, said it will combine the Rockwell Collins business with UTAS in a combined company to be called Collins Aerospace Systems. Greg Hayes, chief executive officer of UTC, said the new company will make aircraft “more intelligent and more connected.”
Kelly Ortberg, CEO of Rockwell Collins, will be CEO of the new company and Dave Gitlin, president of UTAS, will be president and chief operating officer.
The “nose to tail” reach of what the new company would manufacture and install on planes could make airline customers uneasy, several industry analysts have said. In contrast, because there is little overlap between the two companies’ markets, opposition from government regulators is not likely, analysts said.
There was no indication what impact, if any, there might be on jobs in Connecticut. UTC has approximately 65,000 employees in the U.S., with about 18,000 in the state. It employed about 200,000 worldwide at the end of 2016.
Rockwell Collins, based in Cedar Rapids, Iowa, makes airline cabin seating and lighting, food and beverage preparation and storage equipment, water and waste systems and aircraft bathrooms and equipment. It also makes in-flight entertainment systems and equipment in the cockpit, including flight data displays. It employs about 30,000 workers.
It’s also a military contractor, making aerospace computing and navigating systems and jamming equipment. And it makes air traffic collision avoidance systems and self-service airport kiosks and passenger check-in equipment.
UTAS makes equipment such as landing gear components, electrical parts and components and aircraft cabin air conditioning and heating.
The deal calls for UTC to pay $23 billion in stock and will assume about $7 billion in Rockwell Collins debt. The deal comes five years after the Farmington-based UTC paid $18 billion to buy aerospace parts maker Goodrich.
UTC said it will finance the deal through debt and cash. As of June 30, it reported holding $9.3 billion in cash.
The deal comes as Pratt & Whitney faces chronic complaints from airline customers about production problems with its next-generation geared turbofan engine.
In its announcement, UTC said the Rockwell Collins deal can better serve airline customers in maintenance and repairs “through a broad field support network.”
By buying Rockwell Collins, UTC also could counter efforts by manufacturers that are seeking business in the lucrative aircraft maintenance and repair markets.
UTC has staked a lot on the aviation industry. Executives have repeatedly said they are seeking to capitalize on airline transportation that’s been growing with a rising middle class in China, India and other Asian nations. Lower fuel costs also are propelling airline transportation.
The combination of UTAS with Rockwell Collins would be the third major change for what had been Hamilton Sundstrand, which was renamed UTC Aerospace Systems with the Goodrich deal.
Hayes hinted that more change at the conglomerate is possible. Once UTC completes its integration of Rockwell Collins and debt used to partly finance the deal is paid down, “we will have an opportunity to explore a full range of strategic options for UTC,” he said.