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James Li
James Li
Articles (684)  | Author's Website |

Ackman’s United Technologies Announces Company Split

Activist target completes Rockwell Collins merger, announces intent to separate Otis and Carrier businesses

November 27, 2018 | About:

United Technologies Corp. (NYSE:UTX), a company where Bill Ackman (Trades, Portfolio) established an activist stake earlier in the year, disclosed on Tuesday the company has completed its acquisition of Rockwell Collins Inc. (NYSE:COL) and announced its intent to split into three independent businesses: United Technologies, Otis and Carrier.

Company completes merger following China approval

Despite ongoing trade war fears, the Farmington, Connecticut-based aerospace company said last week China’s State Administration for Market Regulation approved the merger, clearing the final regulatory hurdle required to close the Rockwell Collins merger. The merger creates Collins Aerospace Systems, an aerospace systems supplier that combines two companies with “unmatched expertise” in developing electrical and mechanical solutions according to United Technologies CEO Gregory Hayes. During the webcast, Hayes said the merger is expected to promote innovation of intelligent aircraft and generate over $500 million in run-rate pretax synergies over the next four years.

Activist investor continues supporting company separation

Ackman said in his third-quarter shareholder letter that management “has all but confirmed” it would “execute a breakup for which shareholders are highly supportive,” in light of General Electric Co.’s (NYSE:GE) recent setbacks. During the quarter, the Pershing Square manager invested in 407,173 shares for an average price of $133.44 per share, increasing the position to 4,947,788 shares.

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Ackman closed his comments on United Technologies with the continued belief the company’s separation will “serve as a catalyst” for investors who will be able to value the independent businesses separately. GuruFocus ranks the company’s profitability 7 out of 10 on several positive indicators, which include a four-star business predictability rank and operating margins that outperform 83% of global competitors.

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Company announces planned spinoffs of HVAC and elevator businesses

United Technologies also announced it intends to separate its Otis and Climate, Controls and Security businesses into two separate companies. The former manufactures elevators, escalators and moving walkways. Hayes renamed the Climate, Controls and Security businesses as Carrier, the iconic name that provides products ranging from HVAC, refrigeration and security technologies.

Disclosure: No positions.

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About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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