EU investigates United Technologies bid for Goodrich

BRUSSELS/BOSTON Tue Mar 27, 2012 10:38am EDT

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BRUSSELS/BOSTON (Reuters) - EU antitrust regulators are taking a deeper look at a $16.5 billion bid by United Technologies Corp for aircraft components maker Goodrich Corp, a probe that may lead to the U.S. manufacturer selling assets to get approval for the deal.

United Tech unveiled the takeover in September last year, its biggest ever, which would reinforce its presence in the civilian aerospace market. Goodrich parts are used on Boeing Co's 787 Dreamliner and Airbus' A320neo.

The European Commission said on Tuesday it had opened an in-depth investigation after an initial assessment showed potential competition issues in the markets for engine controls and AC power generators, due to the companies' very high combined market share.

"The aviation equipment industry is already concentrated and is characterized by high barriers to entry," EU Competition Commissioner JoaquĆ­n Almunia said in a statement.

"We need to make sure that competition is preserved and incentives to innovate remain. We must also prevent a rise in input prices for aircraft and engine manufacturers as well as other aviation equipment suppliers," he said.

United Tech officials did not immediately respond to a call seeking comment. United Tech Chief Executive Louis Chenevert earlier this month told reporters the company expected the review by the Commission to be a "substantial process."

Goodrich declined to comment.

One analyst said he did not see any major risks in the regulatory investigation.

"It's a formality that has a potential to push out the proposed close date. I don't know that it is necessarily something that you have to be overly concerned with," said Daniel Holland, an equity analyst at Morningstar who follows United Tech.

"At worst, the companies may have to spin off a division to be sure that there are no areas of concern to the EU. The deal has a reasonable chance of success in terms of going through."

The Commission typically requires companies to divest assets in return for regulatory approval. It has occasionally agreed to licensing deals instead.

Shares of both companies were little changed following the announcement, with United Tech up 10 cents at $83.60 and Goodrich down 15 cents at $124.80 in light premarket trading.

The EU watchdog said it was also concerned that the removal of Goodrich as an independent supplier of fuel nozzles and engine controls could lead to higher input prices for engine makers competing with United Tech's engine subsidiary Pratt & Whitney.

The Commission will decide by August 9 whether to clear or block the deal.

(Additional reporting By Sebastian Moffett; Editing by David Holmes)