Honeywell on Friday released the details of a February 16 presentation to United Technologies chairman Edward Kangas and UTC chief executive Gregory Hayes outlining a proposed takeover. According to the presentation, the offer would create an immediate $36 billion cash benefit to UTC shareholders and so-called synergies worth $3.5 billion.
In response, Hayes issued a statement hours later acknowledging that UTC and Honeywell have discussed possible combinations “for years,” and most recently held exploratory discussions last spring. However, he added that a change in the regulatory environment last year would make such a merger infeasible.
“After consultation with our legal advisors, we concluded that a combination would be blocked outright or, even if it were possible to complete a transaction, the regulatory delay, required divestitures, and customer concerns and concessions would ultimately destroy shareholder value far beyond any synergies,” said Hayes. “It would also have a material negative impact on UTC’s operations, customer relationships and talent retention. It would be irresponsible for UTC to move forward with the proposed combination under these circumstances.”
Hayes went on to say that Honeywell’s proposal “grossly undervalues” UTC and overstates potential synergies. Effectively, he added, Honeywell’s proposal amounts to a leveraged buyout of UTC using UTC’s own balance sheet. “Putting aside the insurmountable regulatory risks, the proposal is not an attractive deal for UTC’s shareholders and does not reflect UTC’s strong long term outlook,” concluded Hayes.