United Technologies Is Offering $1 Billion In Equity To Fund Goodrich Acquisition

United Technologies (NYSE:UTX) is offering $1 billion in equity units to fund its acquisition of Goodrich Corporation (NYSE:GR) for an estimated value of $18.4 billion including $1.9 billion in net debt. ^[1] United Technologies is aiming to take advantage of recovering civil aviation industry and surging commercial plane orders with its acquisition of Goodrich, which is an aircraft component manufacturer.

We have a Trefis price estimate of $102 for United Technologies, approximately 35% above its current market price.

See our full analysis of United Technologies stock here

The equity offering

United Technologies is offering 20 million equity units at $50 per share according to a filing with the Securities and Exchange Commission (SEC). The company has applied to list the units on New York Stock Exchange (NYSE) under the symbol, ‘UTX PR A’. ^[2]

United raising funds through multiple channels

However, the equity offering shall provide only a part of the required amount. So, the company has been raising funds through other channels as well. For example, over the past few weeks the company issued corporate debt through bonds worth $9.8 billion, one the largest in the industry over the past few years.

Also, United Technologies is planning to sell its three smaller business units – Rocketdyne space unit, Clipper Windpower and a few industrial units at the Hamilton Sundstrand aircraft components operation, to raise funds required for the Goodrich acquisition.

Antitrust investigation by EU authorities

And, raising funds is not the only challenge that the company faces in completing its acquisition. Authorities in the EU opened antitrust investigations into the planned acquisition in March earlier this year, over concerns of fair competition due to high market share of the combined entity in engine controls and AC power generators market. ^[3] According to our current estimates, United Technologies’ market share of Aviation Engine market stands at 19%. This is expected to rise further post Goodrich acquisition. EU authorities are currently seeking feedback from competitors and customers of United Technologies and Goodrich Corporation, and have set August 31, 2012 as a decision date on its investigation.

Meanwhile, United Technologies on its part oversaw the sale of Goodrich’s share of an engine controls joint venture to Rolls Royce (LON:RR) to bring down the market share of the combined entity in engine controls market, and assuage concerns of the EU authorities.

United Technologies’ share has risen nearly 5% over the past week, and we’ll have to wait and see if the company is able to successfully complete its much announced acquisition and drive top line growth for its shareholders.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. United Technologies offers remedies to EU over Goodrich deal, www.businessweek.com, June 11th 2012 [↩]
2. United Technologies Offering $1 billion of equity units, www.nasdaq.com, June 12th 2012 [↩]
3. United Tech offers assets sale for Goodrich buy, reuters.com, June 11th, 2012 [↩]