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Aerospace world set for new pecking order under $30bn acquisition

f  a maiden voyage
Pratt & Whitney, a United Technologies Corp. company, provides F135 propulsion systems to power all three variants of the F-35 Lightning II aircraft. Image via Commonwealth of Australia, Department of Defence.

In an estimated $30 billion transaction, United Technologies Corporation (UTC) will purchase aviation giant Rockwell Collins, a move set to make the new business one of the largest tier one aerospace systems suppliers in the world.

In an estimated $30 billion transaction, United Technologies Corporation (UTC) will purchase aviation giant Rockwell Collins, a move set to make the new business one of the largest tier one aerospace systems suppliers in the world.

Under the agreement, UTC will acquire Rockwell Collins for $140 per share in cash and UTC stock.

Rockwell Collins is recognised as a leader in aviation and high-integrity solutions for commercial and military customers thanks to its leading-edge avionics, flight controls, aircraft interior and data connectivity solutions. On a 2017 pro forma basis, its estimated sales are greater than $8 billion.


UTC chairman and chief executive Greg Hayes said the acquisition will greatly enhance the company's already existing aerospace capabilities.

"This acquisition adds tremendous capabilities to our aerospace businesses and strengthens our complementary offerings of technologically advanced aerospace systems," said Hayes.

"Together, Rockwell Collins and UTC Aerospace Systems will enhance customer value in a rapidly evolving aerospace industry by making aircraft more intelligent and more connected.

"The integrated companies’ expertise in developing electrical, mechanical and software solutions will allow us to deliver more innovative products and services and provide greater value to our customers and shareowners. This combination will also create new opportunities for the talented employees of both companies to advance innovation in a growing and dynamic industry. Importantly, UTC and Rockwell Collins share cultures of mutual trust and respect, accountability and teamwork that will allow us to work together to achieve our common goals."

Rockwell Collins chairman, president and CEO Kelly Ortberg said the acquisition will deliver strong results for its shareholders, customers and workers.

"We are extremely pleased to announce this compelling transaction with UTC, which is a testament to the value we have created for Rockwell Collins’ employees, customers and shareowners," Ortberg said.

"The combination will enable us to compete more effectively for future business through continued investments in innovation, world-class integrated product offerings and the ability to retain the top talent in the industry. We look forward to the next chapter in Rockwell Collins’ long and proud history, as part of UTC."

Upon completion of the transaction the two companies will be integrated to create a new business unit named Collins Aerospace Systems. Ortberg will assume the role of CEO with Dave Gitlin serving as president and chief operating officer.

Under the terms of the agreement, each Rockwell Collins shareowner will receive $93.33 per share in cash and $46.67 in shares of UTC common stock, subject to a 7.5 percent collar centered on UTC’s 22 August 2017 closing share price of $115.69. UTC expects to fund the cash portion of the transaction consideration through debt issuances and cash on hand, and the company is committed to taking actions to maintain strong investment grade credit ratings. The transaction is projected to close by the third quarter of 2018, subject to approval by Rockwell Collins’ shareowners, as well as other customary closing conditions, including the receipt of required regulatory approvals.

The purchase price implies a total equity value of $23 billion and a total transaction value of $30 billion, including Rockwell Collins’ net debt. 

Rockwell Collins Australia has a long-term agreement with Northrop Grumman Corporation to produce up to 40 per cent of the world’s optical assemblies F-35 electro-optic distributed aperture system (DAS) for the JSFs. As many as 3,000 JSFs could be produced worldwide and Australia is set to acquire 72 of them over the next decade, with potential for a fourth Australian squadron that would bring the number to 100.

The DAS, produced at Rockwell Collins Australia's Sydney headquarters, is a multifunction infrared system providing passive, spherical battlespace awareness for F-35 pilots. It simultaneously detects and tracks aircraft and missiles in every direction, as well as providing visual imagery for day and night navigation and targeting purposes.

The imagery projected onto the pilot's helmet-mounted display provides the capability to look at targets and terrain through the floor and wings of the aircraft

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