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.