DEALTALK-UTC CEO wins over Goodrich after long courtship

Thu Sep 22, 2011 4:21pm EDT

(For more Reuters DEALTALK stories, click on [DEALTALK/])

* United Tech CEO Chenevert proposed takeover year ago

* Goodrich's desire for all-cash simplified deal structure

* Rockwell Collins was not a serious consideration-sources

* Talks paused in Aug amid turmoil, revived later -sources

By Soyoung Kim and Paritosh Bansal

NEW YORK, Sept 22 (Reuters) - Three years ago after an aborted hostile bid for teller machine maker Diebold Inc (DBD.N), United Technologies Corp (UTX.N) Chief Executive Louis Chenevert pledged he would put forward a friendly face the next time.

In striking a $16.5 billion deal to acquire aircraft systems maker Goodrich Corp GR.N on Wednesday, Chenevert made sure he got Goodrich's Marshall Larsen on his side. [ID:nS1E78L0BK] [ID:nS1E78K26R]

Chenevert's courtship started more than a year ago, when he first broached the possibility of a takeover to Larsen, people familiar with the matter said.

The chemistry between the two played a big role in the companies reaching a deal, according to the people. Although it was an all-cash takeover, Chenevert invited Larsen to the deal announcement and also has given him the task of running the combined aerospace systems business for United Technologies.

"This is one that has been on the radar screen, and I think it has been in the works for over a year between Marshall and I," Chenevert said. "It's going to be a happy transition."

Larsen added: "During this time period where we've got to know Louis and United Technologies better, we've come to the belief that our cultures are not different."

Goodrich, which makes equipment for large planes such as landing gear, wheels and brakes, and smaller aerospace component manufacturer Rockwell Collins Inc (COL.N), were both seen for many years as attractive takeover targets for United Technologies as it looked to boost its commercial aerospace exposure. Its aerospace business has lagged growth in its commercial building units, which include Carrier air conditioners, Otis elevators and fire and security systems.

The Hartford, Connecticut, diversified conglomerate set its eyes firmly on Goodrich, which has solid exposure to key commercial plane programs such as the Boeing (BA.N) 787 Dreamliner and upcoming Airbus EAD.PA A320neo and is benefiting from the upswing in plane orders.

While Goodrich derives two-thirds of sales from commercial aerospace, Rockwell relies on its government division for roughly 60 percent of sales and has been under pressure from defense contract delays and program cuts.

"We don't discuss our acquisition target but obviously we love aerospace," Chenevert said. "We felt very good that on the list of opportunities this was absolute top of the list."

United Technologies and Goodrich came close to a deal in early August, but the discussions were put on hold for several weeks as both companies' stock prices swung widely amid the broader market turmoil, people familiar with the matter said.

Talks were reinvigorated in recent weeks and United Technologies then focused on lining up $15 billion in financing to seal the deal, the people said.

JPMorgan Chase (JPM.N), which is the lead adviser for United Technologies, has committed financing along with Bank of America Corp (BAC.N) and HSBC Holdings Plc (HSBA.L).

Goldman Sachs Group Inc (GS.N), while it did not participate in the deal discussions, also had a relationship with United Technologies and was later added as its financial adviser, people familiar with the matter said. Goldman representatives were not immediately available for comment.

Designation as an adviser on deals help banks rake in credit in M&A league tables, a powerful marketing tool in the investment banking business. JPMorgan is currently the top M&A adviser in deals involving U.S. companies, Thomson Reuters data shows.

"There's a whole cadre of banks that are sending me e-mails and calling my phone, it's coming off the hook because people want to be involved in the financing of this transaction. We'll see where it goes long-term, it's premature to call the shot here," Chenevert said.

Law firm Wachtell, Lipton, Rosen & Katz served as legal adviser to United Technologies. Goodrich was advised by Credit Suisse (CSGN.VX), Citigroup Inc (C.N) and law firm Jones Day. (Reporting by Paritosh Bansal and Soyoung Kim, additional reporting by Andrea Shalal-Esa in Washington and Scott Malone in Boston, editing by Matthew Lewis)

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