Diversified industrial conglomerate United Technologies Corp. (UTX) agreed late Wednesday to acquire aerospace components and systems supplier Goodrich Corp. (GR) for $127.50 per share in an all-cash deal valued at $18.4 billion, including net assumed debt of $1.9 billion. The deal is subject to regulatory and Goodrich shareholder approvals.
"Goodrich is a great business with a solid product portfolio and significant aftermarket sales that complement UTC's existing aerospace presence. This acquisition further strengthens our position in the growing commercial aerospace market and enhances our ability to support our customers with more integrated systems," United Technologies Chairman and CEO Louis Chenevert said in a statement.
Charlotte, North Carolina-based Goodrich, a Fortune 500 company, is a global supplier of systems and services to the aerospace and defense industry. It supplies products from aerostructures, actuation and landing gear systems to engine controls, sensors and ISR systems for the aircraft industry. Goodrich has estimated sales of $8 billion in 2011.
The proposed acquisition will see United Technologies add products for the commercial aircraft industry apart from its military aircraft focus, and complement and strengthen its position in aerospace and defense industry. Goodrich is a supplier of products and equipments to Boeing Co. (BA) and Airbus (EADSY.PK) for most of its commercial airplanes.
The offer price of $127.50 per share represents a 47.4 percent premium to the closing price of Goodrich stock of $86.48 on September 15, the day prior to initial reports emerging on the deal. It also represents a 16.4 percent premium to Wednesday's closing price of $109.49.
Goodrich stock has been spiking ever since reports on the deal emerged last week. The stock hit a 30-year high of $114.50 on Tuesday. Meanwhile, the stock soared $12.51 or 11.43 percent in Wednesday's extended trading after closing the regular trading session at $109.49, down $2.33 or 2.08 percent on a volume of 6.22 million shares.
Hartford, Connecticut-based United Technologies expects to finance the deal through a combination of debt and equity issuance, which is expected for about 25 percent of the total consideration. Meanwhile, United Technologies anticipates the transaction to be accretive to earnings in the second year.
Following the closure of the deal, the combined aerospace systems business unit will be headed by the current Goodrich Chairman, President and CEO Marshall Larsen, with the senior leadership team of the combined entity operating out of United Technologies' headquarters.
Reports earlier revealed that United Technologies' other acquisition targets included Textron (TXT) and Rockwell Collins (COL), though the priority was for Goodrich. Honeywell International Ltd. is the current leader in aerospace-systems business, as measured by revenue, with Goodrich at second place, United Technologies' Hamilton Sundstrand unit ranking third, and Rockwell Collins at the fourth position.
Meanwhile, United Technologies said it continues to anticipate full-year 2011 earnings in a range of $5.35 to $5.45 per share, on projected annual revenues of about $58 billion. Analysts polled by Thomson Reuters currently expect the company to report earnings of $5.98 per share for fiscal 2011, on revenues of $8.10 billion. Analysts' estimates typically exclude special items.
UTX closed Wednesday's regular trading session at $74.87, down $1.14 or 1.50 percent on a volume of 6.97 million shares. In the past 52-week period, the stock has been trading in a range of $58.62 to $79.77.
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