Rockwell Collins (COL 131.86, +1.25) has climbed 1.0% after agreeing to be acquired by United Technologies (UTX 114.62, -3.30) for $140 per share in cash and stock. The combined division will be called Collins Aerospace Systems.
Today's announcement comes after two weeks of speculation that some significant change may be in store for Rockwell Collins. Shares of the company jumped to a new record high on August 24 after it was reported that the company cancelled its scheduled appearance at an upcoming conference. The company responded by saying it had a scheduling conflict, but the rumors did not stop there. Rockwell Collins hit a fresh record high on August 29 after the Wall Street Journal reported that United Technologies may announce an acquisition of Rockwell Collins over the Labor Day weekend.
Rockwell Collins specializes in aviation and high-integrity solutions for commercial and military customers. The company is known for leading-edge avionics, flight controls, aircraft interior, and data connectivity solutions. It is estimated that 2017 sales at Rockwell Collins will exceed $8 billion and the acquisition should strengthen United Technologies' position in the market vis-à-vis Boeing.
Rockwell Collins shareholders will receive $93.33 per share in cash and $46.67 in shares of United Technologies stock. This is subject to a 7.5% collar centered on $115.69, which is United Technologies' closing share price from August 22. United Technologies expects to fund the cash portion of the transaction through cash on hand and debt issuance. The transaction is expected to close by the third quarter of 2018. United Technologies expects the transaction to be accretive to earnings after the first full year following closing. Pre-tax cost synergies are expected to exceed $500 million by year four.