UTC to Spin Off Carrier and Otis Elevator

UTC to Spin Off Carrier and Otis Elevator

From an NBC Connecticut article

UTC to Spin Off Carrier and Otis Elevator

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United Technologies Corporation formally announced Tuesday its plan to spin off the operations of Carrier and Otis Elevator in order to focus more heavily on the aerospace industry.

The announcement comes just days after UTC’s purchase of the Iowa-based Rockwell Collins Aerospace was complete, adding more than $6 billion to the company’s aerospace portfolio.

UTC’s CEO Greg Hayes told CNBC Tuesday morning, “The fact is when we looked at over the past ten or fifteen years the cash flows from the aerospace business covered all of the R&D, and their share of the dividend, so there was no cross-subsidy required.”

He added, “I think that was the magic moment when the board said we don’t really need to be together and the question was should we be together.”

Otis Elevator and Carrier will be split off to become independent companies with the same financial backers as United Technologies. They will have new headquarters, corporate leadership, and possibly new locations in the future.

Hayes said he expects it to take two years for the splits to be complete, saying tax issues are the most complicated parts of the move.

“Our split here is actually quite simple, complex in the tax restructuring, but in terms of separating we already have three businesses that run by themselves. Our goal now is to set up three public company headquarters to support those businesses.”

Gov. Dannel Malloy weighed in on the UTC announcement, saying, “we believe that UTC is committed to retaining jobs here and continuing to call Connecticut home, and given the increased hiring we have seen in the state in the last few years this should good for Connecticut residents.”

UTC and Pratt Whitney have commitments with the state to keep their headquarters in Connecticut for the next 15 years in order to use some tax credits.

In total, UTC employees more than 18,000 people in Connecticut, but the company did not specify how many are employed by Carrier and Otis, respectively. UTC’s largest workforce is with Pratt and Whitney.

David Cadden, a business and entrepreneurship expert at Quinnipiac University says the move by UTC signals a corporate shift to a more focused aerospace giant.

“I think we’ve finally seen the end of the conglomerate notion where you have a collection of different businesses in different industries and the notion is that they will balance each other out. The reality is sometimes it’s extremely difficult to coordinate different businesses and come up with a coherent strategy that will be successful for the entire entity.”

From LA Times

United Technologies to split itself in three, spinning off Otis and Carrier

United Technologies to split itself in three, spinning off Otis and Carrier

United Technologies’ Pratt & Whitney division supplies the engine for the F-35 plane. Above, an F-35B Lightning II. United Technologies, which recently purchased Rockwell Collins Inc., will operate with two divisions: Pratt & Whitney and Collins Aerospace Systems. (Jeff J Mitchell / Getty Images)

United Technologies Corp. will break itself up, capping months of pressure on Chief Executive Greg Hayes to separate the conglomerate’s aerospace operations from its elevators and climate-controls divisions.

The company, buoyed by the just-completed $23-billion purchase of Rockwell Collins Inc., will retain its aerospace business and operate with two divisions: Pratt & Whitney jet engines and Collins Aerospace Systems. Otis Elevator Co. and Carrier, a provider of air conditioners and heating systems, will be spun off as independent companies, United Technologies said in a statement Monday.

The three-way split caps a dramatic overhaul of United Technologies under Hayes, who negotiated the blockbuster Rockwell Collins acquisition last year and closed the deal this week. Two activist investors, Bill Ackman of Pershing Square Capital Management and Dan Loeb of Third Point, took stakes in United Technologies and pushed for a breakup. Loeb said a three-way split would unlock $20 billion in shareholder value.

“Our decision to separate United Technologies is a pivotal moment in our history and will best position each independent company to drive sustained growth, lead its industry in innovation and customer focus, and maximize value creation,” Hayes said in the statement.

Hayes will continue as chairman and CEO of United Technologies following the tax-free separations of Otis and Carrier, which are expected to be completed in 2020.

United Technologies climbed 2.1% to $130.65 in late trading in New York. The shares were little changed this year through the close on Monday, leaving its market value at about $100 billion.

In pursuing a split, United Technologies will follow DowDuPont Inc., General Electric Co. and Honeywell International Inc. in busting up a diverse array of holdings.

Honeywell has spun off two low-growth businesses this year. DowDupont Inc., created in a merger of two chemical giants, will split into three companies next year. GE is aggressively selling assets to tighten its focus amid a steep stock decline.

At United Technologies, the world’s largest aerospace supplier, Collins Aerospace and Pratt & Whitney would have had sales of $39 billion last year on a pro forma basis, according to the statement. Otis, which has more than 2 million elevators in use, had $12.3 billion in sales last year. Carrier had $17.8 billion.

4:30 p.m.: This article was updated with a Bloomberg story that has additional details on the deal and the resulting companies.

This article was originally published at 3:40 p.m.

One thought on “UTC to Spin Off Carrier and Otis Elevator
  1. I worked for Otis for 15 years and I’m a long time shareholder of UTC solely because of that. So – Will I be able to desert UTC and follow Otis Elevator in future?
    Also, I’d like to know why we – individual investors in UTC – have been left completely in the dark as to developments and how long is this going to go on?

    1. The spin-off is supposed to be complete by the end of the year. Not being a UTC shareholder myself, I was unaware that the shareholders were not kept in the loop of major decisions like acquisitions and spin offs. This didn’t happen overnight. One would think it would have, at least, been a point of discussion in the annual statement, being a total restructuring of the corporation.

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