United Technologies buying Rockwell Collins for $22.75 billion

Connecticut-based United Technologies announced Monday it will acquire Rockwell Collins, an aerospace company and the largest private employer in Cedar Rapids.

Once the deal closes, it will go down as the largest aerospace merger on record and the nation's overall fourth-largest merger or acquisition in 2017, according to records maintained by financial markets platform Dealogic.

United Technologies will pay $140 per share in cash and stock for Rockwell Collins. The multinational conglomerate will spend $22.75 billion in order to expand its aerospace capabilities. Including debt, the acquisition is worth $30 billion.

Kelly Ortberg, the chairman, president and chief executive officer of Rockwell Collins, described the deal as a "compelling transaction" in a news release Monday. 

"The combination will enable us to compete more effectively for future business through continued investments in innovation, world-class integrated product offerings and the ability to retain the top talent in the industry," Ortberg said. "We look forward to the next chapter in Rockwell Collins' long and proud history, as part of UTC."

Rockwell Collins employs some 9,000 people in the Cedar Rapids area and 30,000 worldwide, according to the Cedar Rapids Metro Economic Alliance. The avionics technology company, which had $5.26 billion in sales last year, makes cabin electronics, cabin interiors, information management systems, mission communications and simulation products for commercial and military aircraft. 

Amid reports of merger talks, Iowa officials told The Des Moines Register last week they would aggressively pursue United Technology leaders once a deal was inked in an effort to keep the Rockwell Collins rooted in Iowa.

United officials offered no details in their announcement about Rockwell Collins' future in Iowa. Once merged, Rockwell Collins and UTC Aerospace Systems will form a new business unit named Collins Aerospace Systems, the announcement said. Ortberg will assume the role of chief executive officer with Dave Gitlin serving as president and chief operating officer.

Company officials could not immediately be released for comment.

"We will want to get in front of that company as soon as possible at the highest level, at the governor's level," Debi Durham, director of the Iowa Economic Development Authority, said last week. "You can expect us to be very proactive at the appropriate time."

Durham said state officials can make a "great case" for keeping Rockwell Collins based in eastern Iowa. In such acquisitions, the actual manufacturing locations and existing, large employment bases don't face as much risk for upheaval as leaders at the highest levels of the company, she said. 

"It really comes to where are the executives going to reside. And right now that’s all speculation," Durham said. "But I can assure you that we will be there very aggressively at the right time to position Iowa very well." 

More:Rockwell Collins likely to maintain strong Iowa presence, analyst says

United Technologies Corp. holds companies that make Otis elevators and escalators, Pratt & Whitney aircraft engines and Carrier air conditioners. With more than 200,000 employees, United Technologies' sales topped $57 billion last year, according to company literature.

It called the Rockwell Collin's avionics businesses complementary and expects $500 million in pretax savings related to the deal. It reaffirmed its 2017 profit estimates.

The companies expect the deal will close by the third quarter of 2018, subject to approval from Rockwell Collins shareholders and regulators.

Companies often pursue mergers to cut costs and realize savings through new efficiencies. But Amrita Nain, an associate professor and director of the finance academy at the University of Iowa's Tippie College of Business, told the Register last week that United was likely looking to add Rockwell Collins to its portfolio to improve its leverage with suppliers. 

"This idea that there's just money lying around that United Technologies can pick up by fixing things in Rockwell is unlikely," she said. "My sense is that United is thinking of this more as a play for power in that market. The bigger they get, the more they control the supply chain."

Though she had no direct knowledge of the merger talks, Nain has closely followed Rockwell Collins. 

And she didn't expect eastern Iowa had much to worry about: United Technologies generally allows its brands to operate "with a fair amount of independence." And she imagines Rockwell Collins would maintain a sizable employment base there after a potential merger.

But Rockwell Collins' executive team could see some shakeup through the deal.

"That is always a question. United Technologies is substantially larger than Rockwell is," she said. "Which of Rockwell's top management team stays on? Who leaves? That will be part of the negotiation."

In Monday's news release, United Technologies Chairman and Chief Executive Officer Greg Hayes said the combined expertise of both companies would provide greater customer and shareholder value.

"This combination will also create new opportunities for the talented employees of both companies to advance innovation in a growing and dynamic industry," he said. "Importantly, UTC and Rockwell Collins share cultures of mutual trust and respect, accountability and teamwork that will allow us to work together to achieve our common goals."

The Associated Press contributed to this story.