WASHINGTON — Although United Technologies has received multiple bids for its subsidiary Sikorsky Aircraft, there are still obstacles to overcome before a sale can go through, and a spinoff of the helicopter business is still possible.
Lockheed Martin, Textron and Airbus are all believed to still be in the running, sources said, with bids that have made it past the initial stage. While there would be synergies for Airbus and Textron, which already manufacture helicopters, there could also be antitrust concerns of one company having too much of a share of the helicopter market.
For that reason, Richard Aboulafia, the Teal Group's vice president of analysis, said Lockheed Martin might be the best fit, even though it doesn't produce helicopters. But with an already successful business integrating mission systems and sensors for helicopters, Lockheed may decide to stay out of the business of building helicopters.
"I'm not so sure they'd want to get platform specific. They've done pretty well being ecumenical," Aboulafia said.
Mike Blades, an analyst who covers defense and aerospace for Frost & Sullivan, said Sikorsky likely will be spun off as a separate entity from UTC. With the Future Vertical Lift program under development by the Pentagon as the next generation of military helicopters, Sikorsky has teamed with Boeing to compete. Textron subsidiary Bell Helicopters is also in the running, so if Textron acquired Sikorsky, it would effectively have interest in both sides of the competition, he said.
If Sikorsky is acquired by either Bell or Boeing, the number of American helo makers drops from three to two, which drastically reduces the amount of competition, he said.
"I think you're going to have a real tough time letting Sikorsky go to a big helicopter maker already," Blades said. "At some point you have to have some competition or there's no reason to innovate anymore."
As a foreign company, an acquisition by Airbus would also receive extra scrutiny from regulators, both in the US and Europe, including from the Department of Defense, the Department of Justice and the European Commission, Aboulafia said.
"Obviously a foreign purchase is going to be politically contentious," he said. "I'm not so sure that there wouldn't be too much product overlap anyway."
Anita Antenucci, senior managing director at Houlihan Lokey international investment bank, agreed that a foreign buyer would receive close attention, but wouldn't automatically be disqualified.
"There are certain elements of the intellectual property that we would not want to leave US control," such as stealth coding, she said.
The European Commission declined to comment for this story. However, with no sale pending, a Sikorsky deal would not have been notified to the commission.
An immediate sale would also have significant tax implications for UTC, which would have to pay a capital gains tax on the proceeds. As a spinoff, UTC would not face the same tax liability, assuming it could show it wasn't a tax avoidance scheme. For the first two years, the burden of proof lies with the company to show this; after two years, the burden shifts to the IRS.
Sikorsky's business outlook is healthy enough that it would be a viable stand-alone company, Blades said. In the near term, it will still provide upkeep and maintenance on the helicopters it has produced, which includes Black Hawks for the US Army and Sea Hawks for the US Navy. And those helicopters, as well as other H60 varieties, remain popular with US allies, providing a robust foreign market for Sikorsky products.
Foreign military sales accounted for almost 10 percent of the helicopter market in 2013, and around 13 percent last year, Blades said.
"Over the next five5 to 10 years, there are plenty of militaries that want H60s," he said.
Martin Banks in Brussels contributed to this report.