United Technologies Corp. (UTX) completed its acquisition of Rockwell Collins, and the conglomerate now plans to split into three different companies – United Technologies, Otis and Carrier. Carrier is the new name of the Climate, Controls & Security (CCS) division, which will be spun-off along with the Otis elevators business.
This move comes as part of United’s decision to focus on its aerospace business in order to improve operations and drive success. United combined its UTC Aerospace Systems division with Rockwell Collins to form Collins Aerospace Systems. After the spin-off, United Technologies will comprise of Collins Aerospace Systems and Pratt & Whitney.
The spin-off is expected to be completed by 2020. Although the Otis and Carrier businesses are significant in terms of sales, the aerospace division is expected to generate more revenue going forward, especially with the addition of Rockwell Collins. The Rockwell Collins acquisition is expected to be $0.15 to $0.20 accretive to adjusted EPS in 2019.
United updated its 2018 guidance to include the acquisition and now expects sales to come in the range of $64.5 billion to $65 billion versus the previous range of $64 billion to $64.5 billion. The acquisition is expected to be dilutive to adjusted earnings by $0.10, resulting in a lowered adjusted EPS range of $7.10 to $7.20 versus the prior range of $7.20 to $7.30.
United has had its share of struggles with the ongoing trade tensions and tariffs impacting its business and leading to price increases. Activist investors Dan Loeb of Third Point and William Ackman of Pershing Square Capital Management had called for a split of the company’s businesses earlier this year.
United is not alone in its separation strategy. The company’s peer General Electric (GE) is also offloading several of its businesses to deal with a heavy debt load and slow sales.
United Technologies’ shares have dropped over 4% thus far this year. The stock fell over 6% following the news of the split on Tuesday. As of 2:50 pm ET, the stock was down 5%.
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