Aircraft parts maker Honeywell International Inc said Tuesday it scrapped its US$90.7 billion offer to purchase rival United Technologies Corp, citing the company’s unwillingness to engage in negotiations.
The move comes after United Tech rejected Honeywell’s offer last week, saying any synergies from combining the businesses would be outweighed by regulatory delays, required divestitures and customer concerns.
With another round of Honeywell merger talks behind it, the focus now turns to United Tech’s ability to operate like a stand-alone industrial conglomerate that faces headwinds from multiple sides of their business.
“Now the pressure is on for UTC to create shareholder value,” said Jeff Bialos, legislation partner with Sutherland Asbill & Brennan along with a former senior Pentagon official.
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Honeywell said it strongly disagreed with United Tech’s characterization of the regulatory and customer risks of a deal.
“We remain confident that the regulatory process will not have presented a material obstacle to a transaction,” Honeywell said inside a statement .
Analysts and industry executives said paths that United Tech can keep boost its stock include splitting its industrial and aerospace arms or pursuing its own acquisitions.
Reuters had reported Friday that United Tech CEO Greg Hayes are not committed to break up the company, but will instead focus on initiatives for example investment in its Pratt & Whitney turbofan engines. Its underperforming Otis elevator division is facing steep engineering and development costs as the company attempts to refresh its products.
United Tech makes everything from air conditioners to elevators and fire equipment, to some broad range of aerospace equipment, including tires, cockpits and engines. The company called Honeywell’s decision to decrease its pursuit an “appropriate outcome” given the regulatory obstacles and negative customer reaction.
“UTC will remain laser focused on our key priorities – program execution, innovation, cost reduction and disciplined capital allocation,” the company said on Tuesday.
Shares of United Tech, the producer of Otis elevators, Carrier air conditioning units and Pratt & Whitney jet engines, were down 2.8 percent in early trading , while Honeywell was up 3.2 percent.
A mixture of the 2 would create a company with nearly US$100 billion in revenue, responsible for a lot of equipment on commercial airliners, ranging from jet engines to cockpits and landing gear.
Major customers Airbus Group and Boeing Co weighed in a week ago, saying they did not support this type of deal.
A merger would also provide drawn scrutiny in the Pentagon, since the companies make parts for key weapons programs, including Lockheed Martin Corp’s F-35 program.
United Tech’s shares have risen about 10 % since Feb. 19, the final trading day before deal talks were first reported.