Yesterday I started a new position in NYSE: UTX, United Technologies Corp. I am adding UTX to increase my position in the Aerospace and Defense industry. UTX is in takeover talks with Rockwell Collins NYSE: COL. The stock has taken a hit on the rumors of this potential takeover.
Here are some reasons why:
1. Changing the competitive landscape: United Technologies’s interest in potentially acquiring Rockwell Collins has, unsurprisingly, caught the attention of rival Honeywell International. “I do care” about the possible move by the two rivals, Tim Mahoney, President and CEO of Honeywell Aerospace says at a Jefferies event. “If it comes together it will change the competitive landscape,” he says.
2. Improvement in Sales: A deal would increase United Technologies’ role as a significant supplier to Boeing Co. and Airbus SE as the aerospace industry boosts production for a new generation of jets. The company already owns one of the world’s biggest jet-engine makers, Pratt & Whitney, and an aerospace division that makes parts such as wheels and landing gears. Both companies are also major Pentagon suppliers.
3. Strategic Move: Analysts at William Blair said a takeover of Rockwell Collins would make “tremendous strategic sense” as it would expand United Technologies’ most profitable business with little overlap. Nigel Coe, analyst with Morgan Stanley, said the combination has little overlap in the airplane parts the companies make. Rockwell’s portfolio includes displays, seating and communications, while United Technology provides electrical systems, wheels and engine controls.
4. Beta: 1
5: Dividend Yield: 2.36%
6. UTX already took the hit on the stock price