United Technologies Corp. [UTX] yesterday said it has completed is $18 billion acquisition of Goodrich Corp. after obtaining final regulatory approvals in the United States and Europe.
The deal strengthens UTC’s positions in the aerospace and defense markets.
UTC said that the regulatory clearances require the company to sell Goodrich’s Electric Power Systems, and its Pumps and Engine Controls businesses. UTC will also sell Goodrich’s interest in the Aero Engine Controls joint-venture with Britain’s Rolls-Royce. These divestments were expected, UTC said.
UTC last September announced its agreement to acquire Goodrich, which has sales of about $80 billion, 70 percent of which are in the aerospace market and the rest in defense and space (Defense Daily, Sept. 23, 2011). At the time, UTC CEO Louis Chenevert said that the company is “bullish on aerospace” given the bright outlook for the sector.
UTC is standing up a new Aerospace Systems division based in Charlotte, N.C., that consists of the former Hamilton Sundstrand division and Goodrich. Aerospace Systems will have two businesses, Aircraft Systems and Power, Controls & Sensing Systems.
To help cover the cost of the acquisition, UTC this week said it has agreed to sell Hamilton Sundstrand’s industrial products units to the private equity firms BC Partners and The Carlyle Group [CG] for $3.5 billion. UTC also agreed this week to sell its Rocketdyne rocket engine business to GenCorp, Inc. [GY] for $550 million, another deal that will help fund the Goodrich merger.
UTC also yesterday reported its second quarter financial results, posting essentially flat net income on lower sales.
Net income was just 1.3 billion, $1.48 earnings per share, against just $1.3 billion ($1.47 EPS) a year ago. Excluding results from discontinued operations, net income was nearly $1.5 billion (1.62 EPS), topping consensus estimates by 20 cents. Free cash flow was $1.5 billion.
Sales declined 5 percent to $13.8 billion from $14.5 billion. UTC actually achieved 1 percent organic growth but divestitures and adverse foreign currency translation lopped $800 million from the top line.
UTC’s Climate, Controls & Security, Hamilton Sundstrand and Pratt & Whitney divisions all managed to boost operating profits while Hamilton and Pratt were the only divisions to record sales gains in the quarter.
Due to the slowing global economy, a weaker Euro and a later than expected close on the Goodrich acquisition, UTC lowered its sales and earnings guidance for the year. Sales are projected to be between $58 billion and $59 billion, down $3 billion from the previous outlook.
Earnings are now expected to be in the range of $5.25 to $5.35 EPS versus prior guidance of $5.30 to $5.50 EPS.