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United Technologies (UTX) will be dismantling, putting an end to months of pressure on CEO Greg Hayes to separate the conglomerate's aerospace business from its elevator divisions and climate control systems.
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The company, backed by the $ 23-billion purchase of Rockwell Collins, will maintain its aerospace business and operate with two divisions: Pratt & Whitney Reactors and Aerospace Systems. Collins. Otis Elevator and Carrier, a supplier of air conditioners and heating systems, will be split into independent companies, announced United Technologies in a statement released Monday.
The three-part division ends the revamping of United Technologies under the direction of Hayes, who negotiated the acquisition of the Rockwell Collins blockbuster last year and concluded the transaction 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 dissolution. Loeb said a three-way division would unlock $ 20 billion in value for shareholders.
"Our decision to separate United Technologies is a pivotal moment in our history and will allow each independent company to generate sustained growth, lead its industry in innovation and target its customers, as well as maximize the creation of value, "Hayes said in a statement.
The company will discuss additional details during a teleconference Tuesday at 8:00 am ET.
United Technologies Split in 2020
Hayes will remain as chairman and CEO of United Technologies after the Otis and Carrier duty-free separations, which are expected to be completed in 2020. Pershing and Third Point declined to comment.
United Technologies rose 2.1% to 130.65 at the end of the session in New York. Stocks changed little this year until closing on Monday, leaving their market value at around $ 100 billion. A Standard & Poor's index of companies in the aerospace and defense sector decreased by 1.8% over the same period.
Conglomerates separate
Continuing a split, United Technologies will follow DowDuPont (DWDP) General Electric (GE) and Honeywell (HON) to dismantle a wide range of holdings.
Honeywell has created two low-growth businesses this year. The result of the merger of two giants of chemistry, DowDupont, will be split into three separate companies next year. GE aggressively sells its assets in order to focus more in the context of a sharp drop in equities.
Collins Aerospace and Pratt & Whitney reported $ 39 billion last year on a pro forma basis at United Technologies, the statement said. Otis, which has more than two million elevators in service, had sales of $ 12.3 billion last year. The carrier had $ 17.8 billion.
Until the transactions are completed, United Technologies, of Farmington, Connecticut, will continue to pay its quarterly dividend of at least 73.5 cents per share.
After the separation, the quarterly dividends paid by the three companies will initially total at least 73.5 cents per share. But "the dividend policy of each company will be determined by its respective board of directors after the separation," the statement said.
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