United Technologies purchases Goodrich at 47% premium

United we stand.

United Technologies announced its largest purchase to date, acquiring aircraft-components maker Goodrich in a $16.4-billion cash deal. United will pay $127.50 for each share of Goodrich, representing a 16% premium to Wednesday’s close and a 47% premium to last Thursday’s close when news of the deal was initially leaked. Roughly three quarters of the purchase will be funded with debt while the remainder of funds will be raised from new stock issuance. Additionally, United executives said the company would reduce its spending on share buybacks and other M&A activity over the next few years as it digests the purchase. The company expects roughly $350-400 million in savings, primarily by eliminating functions Goodrich won’t need now that it is no longer a publicly traded company.

United Technologies' CEO said, “We are on the eve of a substantial ramp-up. With the addition of Goodrich we really strengthened our aerospace position.” Goodrich’s operations will be combined with United’s Hamilton Sundstrand division and will be run by current Goodrich CEO Marshall Larsen. United has been attempting to improve its position in the aerospace industry; however, growth has been slower than that of its commercial building units. The purchase of Goodrich will make the company one of the biggest players in the U.S. aviation industry and will increase United’s exposure to the commercial aviation industry, essential as the U.S. government continues to pare its spending

Goodrich (GR : NYSE : US$120.60), Net Change: 11.11, % Change: 10.15%, Volume: 35,355,188
United Technologies (UTX : NYSE : US$68.31), Net Change: -6.56, % Change: -8.76%, Volume: 13,007,744

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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