Honeywell announced that it is no longer pursuing a strategic combination with United Technologies (UTC) due to their unwillingness to engage in negotiations.
Honeywell was interested in a combination because of compelling value creation for both sets of shareholders and a readily executable transaction due to two largely complementary business portfolios.
“Honeywell strongly disagrees with UTC's characterization of the regulatory and customer risks associated with the transaction. We remain confident that the regulatory process would not have presented a material obstacle to a transaction,” the company said in a statement Tuesday.
The company argued that UTC felt the same way as Honeywell did when UTC approached them in May 2011 and in April 2015. The company had hoped to continue amicable and quiet discussions of a combination after it approached UTC’s Chairman and CEO on February 19, 2016.
Honeywell said, “In fact, we were told by them during the meeting that such a combination would be fabulous, they would take it very seriously, and they would get back to us with questions within a week in anticipation of their upcoming Board meeting.”
Both companies have agreed in the recent past that the industrial logic was compelling in a very doable transaction. "From both an industrial logic and shareholder value perspective, Honeywell and UTC are a great match and that is why the two companies have been talking about a combination for more than 15 years," said Honeywell Chairman and CEO, Dave Cote.
"We made a full and fair offer that would have greatly benefitted both sets of shareowners. Considerable value would have been added through the $3.5 billion of very achievable cost synergies (6% of UTX sales, 4% of total sales) and application of Honeywell management practices; especially our extensive software capability and cost management that would support needed product reinvestment. It also would have created the opportunity to construct an excellent core growth portfolio. However, continuing to try to negotiate with an unwilling partner is inconsistent with our disciplined acquisition process.”
UTC in response to the Honeywell statement noted that it was an appropriate outcome given the strong regulatory obstacles, negative customer reaction and the potential for the protracted review process would destroy shareholder value.
UTC recalled its earlier statement saying that it will remain laser focused on program execution, innovation, cost reduction and disciplined capital allocation.
UTC said Honeywell’s press statement was more of ‘forward looking statements’ with words "believe," "expect," "plans," "project," "target," "will," "should," "see," "confident", "ensure" and similar terms. “There can be no assurance that any future events will occur as anticipated, if at all, or that actual results will be as expected. All forward-looking statements involve risks, uncertainties and assumptions that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. The forward-looking statements speak only as of the date of this press release and we undertake no obligation to update or revise any forward-looking statements as of a later date,” UTC said Wednesday.