WASHINGTON — Honeywell has abandoned its efforts to acquire United Technology Corp., the company announced Tuesday.
The announcement came days after Honeywell publicly released details of its $90.7 billion offer, which UTC turned down. In response to Honeywell's public overtures, UTC released its own Securities and Exchange Commission filing laying out its reasoning for spurning the offer, which included a challenging regulatory environment and the valuation of UTC in Honeywell’s offer.
In a news release, Honeywell stated that it “strongly disagrees” with UTC’s assessment of the regulatory risks associated with the transaction. UTC agreed with Honeywell’s outlook when it approached the New Jersey-based company about a possible deal in May 2011 and April 2015, the release states.
“From both an industrial logic and shareholder value perspective, Honeywell and United Technologies are a great match and that is why the two companies have been talking about a combination for more than 15 years,” Honeywell Chairman and CEO Dave Cote said in a prepared statement. “We made a full and fair offer that would have greatly benefited both sets of shareowners.”
But continuing to negotiate with an unwilling partner does not fit with Honeywell’s acquisition process, he said.
Last week, UTC CEO Gregory Hayes wrote in a public letter that the changes in the regulatory environment in 2015 led UTC to conclude that such a merger would be blocked outright.
“[E]ven if it were possible to complete a transaction, the regulatory delay, required divestitures, and customer concerns and concessions would ultimately destroy shareholder value far beyond any synergies,” he wrote.
Additionally, Honeywell’s offer “grossly undervalues” UTC, and overstates potential synergies, he wrote.
The public disclosures led some to speculate that Honeywell was preparing for a possible hostile takeover of UTC, but Tuesday’s announcement seems to rule out such a scenario, at least for now.
Honeywell’s Feb. 19 offer to UTC was based on a combination of $35.8 billion in cash and $54.9 billion of Honeywell shares. This represents a 22 percent premium above UTC’s share price, Honeywell argued. In an 11-page Power Point presentation summarizing its offer, Honeywell suggested a merger would create $3.5 billion in cost synergies for the new entity, which would produce a projected $97.1 billion in annual sales.
With $13.02 billion in 2014 defense revenues, UTC ranked 8th in Defense News’ most recent rankings of the Top 100 global defense firms. UTC’s overall 2014 revenues were $65.1 billion.
Honeywell, with $4.75 billion in defense revenues, ranked 16th. Overall, it had $40.3 billion in revenues in 2014.