United Tech and Honeywell deal

Recently disclosed that United Technologies Corp and Honeywell International Inc. are having merger talks but the deal is not going as smoothly as anyone imagined, there are many regulatory obstacles in between. According to United Tech, merger can be blocked orconditioned on significant divestitures after a lengthy review period that will destroy shareholder value.

These two multinationals first began exploring a merger as early as 1993, but the talks were revived after a strategic review initiated by United Tech's Chief Executive Greg Hayes, last year. This resulted in selling Sikorsky Aircraft to Lockheed Martin Corp.If these two companies merge together, they can build the plane from tip to tail. Now this would be unacceptable to Boeing and Airbus. Boeing and Airbus are both customers to these companies and they constantly pressurize them to reduce costs.

Merger discussions between the two companies are not currently active, and there have been no recent meetings among lawyers or bankers on any of the concerned matter.If the merger happens it would create combined sales of more than $90 billion because the company will beproducingequipment for commercial airliners, from jet engines to cockpit and landing gears.

According to some analysts and antitrust experts the deal could ultimately get approval if the parties agree to some big divestitures, since there are other competitors too, and if they enlisted the backing of their biggest customers. The deal can win antitrust if there is a very substantial expression of concern by the airplane manufacturer.

United Technologies having been offered a premium for its shares, the deal has been seen by the company as "dead in the water" with U.S. antitrust officials because ofcoinciding business in the commercial aerospace and military markets.

United Technologies, which is also has been hurt by a strong dollar like many multinationals, unveiled a $1.5-billion restructuring plan to cut costs in December, depicting slow growth in China and weakness in Latin America and Europe.

On the other hand Honeywell, which counts Boeing and Bombardier Inc.as its customers, has cut jobs and sold or merged businesses to reduce the costs.

Both the companies are under pressure by its clients and had many defense deals canceled, if merger happens both can be in win-win situation or these need to find a safe way to get out of this financial situation or their clients will keep lowering the equipment prices.