Report: United Technologies close to $40 billion merger with Honeywell

Friday, October 20th 2000, 12:00 am
By: News On 6

STAMFORD, Conn. (AP) _ United Technologies Corp. is in talks to buy Honeywell International Inc., a merger that would bring together two major manufacturers of industrial and aerospace products.

It would be a deal said to be worth $40 billion.

The companies confirmed their merger discussions in a press release Thursday evening, but would not comment on details of the talks.

Hartford, Conn.-based United Technologies is offering 0.74 of one of its shares, or $50.32, for each Honeywell share, The Wall Street Journal reported Thursday, citing people familiar with the talks.

United Technologies is an industrial conglomerate whose products range from jet engines to elevators. Morristown, N.J.-based Honeywell makes equipment for aerospace systems, power generation, transportation and factory automation, as well as specialty chemicals, plastics and fibers. The company was created less than a year ago through a merger with AlliedSignal.

``From an aerospace and defense perspective, it would be a blockbuster deal,'' said Jon Kutler, president of Quarterdeck Investment Partners, a Los Angeles-based merger and acquisition firm in aerospace and defense. ``You can buy everything from engines to lighting systems at the same place.''

The deal would boost United Technologies earnings by as much as 25 cents a share, excluding any value applied to significant synergies, the Journal reported. The combined company could save up to $1 billion a year several years after the deal settles, a source told the Journal.

United Technologies chairman and CEO George David would be chief executive of the combined company _ to be called Honeywell _ while Honeywell chairman and CEO Michael Bonsignore would become chairman, the Journal and CNBC reported. United Technologies would hold a majority of board seats, while Honeywell shareholders would own a majority of the company, the Journal reported.

A deal could be reached this weekend.

Honeywell spokesman Tom Crane refused to comment on the report. United Technologies spokesman Peter Murphy also declined comment.

The talks were first reported on the CNBC business TV network.

Honeywell, which has about 120,000 employees worldwide, earned $1.54 billion on revenue of $23.74 billion in 1999.

United Technologies makes Pratt & Whitney jet engines, Carrier air conditioners, Otis elevators and Sikorsky helicopters. The company, which has 148,300 employees worldwide, earned $1.53 billion on revenue of $23.84 billion in 1999.

The two companies have had previous dealings. In February, they announced a joint venture called MyAircraft with a third company, i2 Technologies Inc. of Dallas, a maker of Internet commerce software.

MyAircraft is an electronic marketplace for aerospace products and services and is expected to start operating before the end of the year.

On Tuesday, Honeywell reported that third-quarter profits fell 49 percent, in part due to planned divestitures.

Net income was $282 million, or 35 cents per share, compared with $554 million, or 68 cents per share, a year earlier. Excluding one-time charges for a brakes recall and several divestitures of non-core businesses, Honeywell earned $613 million, or 76 cents per share, meeting the forecasts of analysts surveyed by First Call/Thomson Financial.

At United Technologies, third-quarter operating earnings rose 14 percent, beating analysts' expectations. Net income was $496 million, or 98 cents per share, compared with $90 million, or 16 cents per share, in the same period a year ago.