United Technologies
$140 is being paid per share in cash and stock will be split as is follows: Rockwell investors will receive in cash $93.33 a share and the $46.67 left over will be a part of the United Technologies stock:
The price is an 18 percent premium above where Rockwell's stock was traded on Aug. 3, a day before news reports said United Technologies was considering a bid for Rockwell.
Initially, the deal seemed advantageous for United as a point of leverage against competitors like Boeing
United shares have been described as "dead money" by Cowen research, after they plummeted on Tuesday by nearly 6%. "The proposed acquisition of Rockwell Collins is a great strategic fit. It gives United Technologies complementary products, especially avionics and IMS, to maximize potential for digital applications," says a Cowen analyst. "However, the deal price, including debt, implies a 15.4 multiple on Rockwell's pro-forma EBITDA for 2017."
Another factor perpetuating skepticism regarding the deal is the notion that it endows United with immense market power, more than the industry can withstand. The newly formed company can allegedly produce "more than 50%" of a standard Boeing 787 aircraft, to which both Boeing and Airbus have expressed concerns. "Until we receive more details, we are skeptical that it would be in the best interest of, or add value to, our customers and industry," Boeing said in a statement.
If any of United's competitors choose to take up the matter with antitrust regulators, particularly in Europe, the aviation giant could be in big trouble.
"Many initially assumed it would be a slam dunk because of the lack of overlap. But the (European Union) probe may prove to be difficult, simply on the grounds that the combined company would be so big," said an aerospace analyst at United Kingdom-based Agency Partners.
United may also be subject to the 'portfolio effect,' which implies that a company is "able to exercise leverage based on the fact that they sell a wide range of specialized products to certain customers."
Thus, with many investors anticipating whiplash from competitors and regulators, it is understandable as to why United shares have been in the negatives these past few days. While the corporation has been able to gain invaluable product-related and technical advantages as a result of the merger, it is also these very advantages that might ironically be United's downfall if they are deemed perpetuators of unfair market power.
In order to survive this, United will need to prepare a solid and very public defense justifying its future plan of action, which should be neither overtly aggressive nor too dormant in nature.
- https://www.nytimes.com/2017/09/04/business/united-technologies-rockwell-collins.html?rref=collection%2Fsectioncollection%2Fbusiness
- https://www.cnbc.com/2017/09/06/shares-of-united-technologies-are-dead-money-cowen-says.html
- http://www.thegazette.com/subject/news/business/rockwell-united-technology-deal-faces-bumpy-road-20170906