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UPDATE 1-United Tech says Goodrich deal to close in July
May 22, 2012 / 5:16 PM / 5 years ago

UPDATE 1-United Tech says Goodrich deal to close in July

* Confident in face of EU antitrust review

* Says sale of Rocketdyne, industrial units on track

By Scott Malone

May 22 (Reuters) - United Technologies Corp is confident that its $16.5 billion takeover of aircraft components maker Goodrich Corp will close in July, despite a continuing European Union antitrust review of the deal.

“We have good confidence ... that we will close by mid- to late July,” United Tech Chief Executive Louis Chenevert told an investor conference on Tuesday. “We have been working aggressively with the customers, with the agency, for antitrust approval.”

That expression of confidence comes less than a week after EU antitrust regulators extended to Aug. 31 from Aug. 9 their deadline to decide whether to approve the deal.

“We have done the right things to wrap this deal up,” Chenevert said, though he declined to directly address the state of the antitrust review.

The world’s largest maker of elevators and air conditioners is also confident it will be able to close the sale of three small units that it put on the block in March -- its Rocketdyne space business, the industrial arm of its Hamilton Sundstrand division, and its Clipper Windpower operation.

INTEREST IN INDUSTRIAL ARMS

Hartford, Connecticut-based United Tech aims to be in contract on Rocketdyne by mid-June and is “seeing very good interest in the auction process for the industrial businesses,” Chenevert said at the Electrical Products Group conference in Longboat Key, Florida.

The company expects to close its sale of Clipper by the year’s end, said Chenevert, whose talk was monitored over the Internet.

United Tech put the three units up for sale to raise cash and avoid having to immediately issue new common shares to fund the Goodrich deal, its biggest acquisition in a decade. It originally planned to issue $4.6 billion in new shares to pay for the takeover. But in the face of shareholder objections, in March it unveiled a new plan to sell the three businesses -- which it estimates will bring in about $3 billion -- and to issue $1.5 billion in mandatory convertible notes, in addition to taking on debt.

Chenevert declined to answer analysts’ questions on whether the company would be able to reduce or eliminate the number of new convertible notes, which would eventually become shares.

United Tech shares were up 1 percent at $74.44 in afternoon trade on the New York Stock Exchange.

DEAL-MAKING PICKS UP

The pace of deal-making has picked up in the manufacturing industry this year, most recently seen in Monday’s news that Eaton Corp has reached an $11.8 billion deal to acquire electrical equipment maker Cooper Industries Plc.

United Tech officials earlier this month said negotiations to sell Rocketdyne were focused on one buyer.

Private equity firms TPG Capital and Carlyle Group LP are separately considering bids for the Hamilton industrial units, which make pumps and compressors, people familiar with the matter told Reuters last week.

A return of private equity dealmakers to the sector could push takeover prices higher, said Brian Jellison, CEO of manufacturer Roper Industries Inc, speaking at the same conference on Monday.

“Seller expectations are extraordinarily high, the highest ever. That’s because ... banks have lost, again, all discipline,” Jellison said, adding that his company was recently outbid on an acquisition it wanted to do by a private equity company.

“People are buying and paying for quite a high price. I think it would be very interesting to see what ultimately United Technologies gets for Milton Roy and what do they get for Sullair and how does that kind of -- does one person buy it and how does that work out,” Jellison said, referring to two of the Hamilton industrial arms that United Tech is aiming to sell.

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