UPDATE 1-United Technologies mulling Sikorsky unit options - report

Mon Jan 27, 2014 2:15pm EST

Jan 27 (Reuters) - Diversified manufacturer United Technologies Corp is weighing options for its Sikorsky helicopter unit, including a potential sale or spinoff, industry publication Defense News reported on Monday, citing unnamed sources.

United Technologies shares were up 2 percent in afternoon trading, against relatively flat U.S. markets.

According to the report, Sikorsky, which manufactures the Black Hawk military helicopter, among others, could be a target for European companies seeking to enter the U.S. market.

A United Technologies spokesman said the company does not comment on market rumors.

In its fourth-quarter earnings report last week, United Technologies said Sikorsky totaled $6.25 billion in revenue for 2013, a decline of 7.9 percent, while operating profit fell more than 16 percent to $594 million.

Sikorsky accounted for about 10 percent of United Technologies' overall revenue of $62.6 billion last year.

Peter Arment, an analyst with Sterne Agee, said that while U.S. military budgets for helicopters ballooned during the Iraq and Afghan wars, "going forward, helicopter budgets are resetting ... which will limit the growth of the helicopter industry for several years."

Valuations for defense companies trail United Tech's other businesses, he added.

United Technologies is a major player in parts of the aerospace industry as well as a big manufacturer of elevators and climate control systems.

"We would view a spinoff of Sikorsky as positive and could unlock substantial value for UTX given it removes the lowest multiple portion of the company," Arment said in a research note.

UTX shares rose 2.1 percent to $114.19 in afternoon trading on the New York Stock Exchange.

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