UPDATE 4-United Tech makes biggest bet ever on Goodrich

* United Tech to issue $4.6 billion in new shares

* Will suspend buybacks for a year, cut other M&A spending

* Deal came after a year of talks

* United Tech shares fall 8 pct, Goodrich up 10 pct (Adds Standard & Poor's reviewing credit rating, analyst comment)

By Scott Malone

Sept 22 (Reuters) - United Technologies Corp's (UTX.N) Louis Chenevert placed the biggest bet of his tenure as chief executive with a $16.5 billion cash deal for aircraft components maker Goodrich Corp (GR.N).

It would be the largest acquisition ever for United Tech, boosting the diversified U.S. manufacturer's presence in the civilian aerospace market. The company, worth $69 billion on the stock market, expects to issue $4.6 billion in new shares and take on about $15 billion in debt to fund the deal.

Goodrich had been on United Tech's radar since the time of Chenevert's predecessor as CEO, George David. Talks between Chenevert and Goodrich CEO Marshall Larsen began more than a year ago, Chenevert said.

"There was no other property that offered the opportunities that Goodrich offers," the Canada-born executive told Reuters in an interview on Thursday.

He dismissed reports that Hartford, Connecticut-based United Tech had considered other targets in the sector, including Rockwell Collins Inc (COL.N). "These other businesses are totally different than what we do. This one happens to do complementary products and systems," he said.

While the deal looks strategically sound, the $127.50 per share offer price -- a 47 percent premium on Goodrich shares before Reuters reported United Tech was on the prowl -- was more than investors had expected, said Edward Jones analyst Matt Collins.

"We are disappointed that (United Tech) will be issuing stock to help pay for (Goodrich), in order to maintain its "A" credit rating," Collins said.

Commercial aviation is expected to be a growth market in coming years, driven in part by strong demand in developing parts of Asia. Goodrich parts are used on Boeing Co's (BA.N) 787 Dreamliner and Airbus' A320neo.

Governments in the United States and Western Europe are preparing to cut military spending amid broad budget crunches. Those cutbacks could prompt a new wave of consolidation in the defense sector, with General Electric Co (GE.N) and Honeywell International Inc (HON.N) seen as possible buyers.

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For a story on defense consolidation: [ID:nS1E78I1I4]

Facts about United Tech CEO Chenevert [ID:nS1E78F1JE]

For a related Breakingviews column: [ID:nS1E78L0MT]

Graphic on United Tech deals:

r.reuters.com/byx73s

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SHARES DIVERGE

United Tech shares were down 8.3 percent on Thursday. Goodrich rose 10.2 percent, the day's biggest gainer on the New York Stock Exchange.

Chenevert said he paid little attention to a one-day share slide.

"The market is what the market is going to be today," he said. "I did this deal because in 10 years, 20 years from now, it (will have been) absolutely the right thing to do."

Together, the companies will generate $66 billion in revenue this year, though the deal is not expected to close until mid-2012 and may not boost United Tech's earnings for another two years after that.

United Tech will assume $1.9 billion of Goodrich debt.

United Tech currently generates 18 percent of its revenue from the U.S. military, and expects that percentage to rise a couple of points as a result of the deal. Goodrich generates about one-third of its revenue from military sales.

If successful, the deal will be United Tech's largest acquisition ever. In 2000 it made a $36 billion offer for Honeywell but was outbid by General Electric Co (GE.N). The GE-Honeywell combination was ultimately nixed by European regulators.

CUTTING BACK FUTURE SPENDING

United Tech, the world's largest maker of elevators and air conditioners, said it would throttle back on other spending for the next few years as it digests the Goodrich deal.

It also plans to freeze share buybacks through 2012, resuming them on a limited basis in 2013 and 2014, and will cut its typical takeover budget to $1 billion a year from $2 billion. Chief Financial Officer Greg Hayes said those moves were necessary to protect the company's "A" credit rating, which he views as "sacrosanct."

Standard & Poor's lowered its credit outlook on United Tech to "negative" from "stable" as a result of the move, saying that it could lower its rating on the company as it issues new debt. Fitch also said it would review the company's rating.

The company believes it will be able to generate $350 million to $400 million a year in cost savings through the combination with Goodrich, Hayes said.

JPMorgan Chase & Co (JPM.N) is leading a $15 billion loan package to fund the deal, with Goldman Sachs Group Inc (GS.N) also involved.

United Tech shares were down $6.15 to $68.72 at midday, and Goodrich rose $11.20 to $120.69. (Reporting by Scott Malone in Boston, editing by Dave Zimmerman, Derek Caney and John Wallace)