United Technologies (NYSE:UTX) | Acquisitions & Divestitures

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Acquisitions



Acquisitions made by United Technologies (UTC) in the years 2009 to 2014 are discussed in the following.

United Technologies' investments in businesses in 2014, 2013, 2012, 2011, 2010 and 2009 totaled $530 million, $151 million, $18.6 billion, $372 million, $2.8 billion and $703 million, respectively.



Majority Interest in a Pratt & Whitney Joint Venture


UTC's investments in businesses in 2014 consisted of the acquisition of the majority interest in a Pratt & Whitney joint venture and a number of small acquisitions, primarily in the company's commercial businesses.



Grupo Ascensores Enor Acquisition


On February 7, 2013, UTC completed the acquisition of Grupo Ascensores Enor, S.A. (Enor), a privately held company headquartered in Spain with operations in Spain and Portugal, which designs, manufactures, installs and services elevators. Enor's 2012 sales were approximately $50 million. Under the terms of the transaction, Zardoya Otis, S.A. (ZOSA), a non-wholly owned subsidiary of UTC, exchanged publicly traded shares of ZOSA with a fair value of approximately $240 million as of the transaction completion date for all of the shares of Enor.



Goodrich Acquisition


On September 21, 2011, United Technologies announced an agreement to acquire Goodrich Corporation (Goodrich), a global supplier of systems and services to the aerospace and defense industry with 2011 sales of $8.1 billion. On July 26, 2012, the acquisition of Goodrich was completed. Goodrich products include aircraft nacelles and interior, actuation, landing and electronic systems. Under the terms of the agreement, Goodrich shareholders received $127.50 in cash for each share of Goodrich common stock they owned on July 26, 2012. This equated to a total enterprise value of $18.3 billion, including $1.9 billion in net debt assumed. The acquired Goodrich businesses were combined with the legacy Hamilton Sundstrand businesses to form the new UTC Aerospace Systems segment. The Goodrich acquisition and the formation of UTC Aerospace Systems provide increased scale, financial strength and complementary product offerings, allowing UTC to significantly strengthen its position in the aerospace and defense industry, create aftermarket efficiencies for the company's customers, accelerate its ability to drive innovation within the aerospace industry, and enhance its ability to support its customers with more integrated systems. To finance the cash consideration for the Goodrich acquisition and pay related fees, expenses and other amounts due and payable, UTC utilized the previously disclosed net proceeds of approximately $9.6 billion from the $9.8 billion of long-term notes issued on June 1, 2012, the net proceeds of approximately $1.1 billion from the equity units issued on June 18, 2012, $3.2 billion from the issuance of commercial paper during July 2012, and $2.0 billion of proceeds borrowed under the April 24, 2012 term loan credit agreement. For the remainder of the cash consideration, UTC utilized approximately $0.5 billion of cash and cash equivalents generated from operating activities.



Other Acquisitions


On March 1, 2010, United Technologies completed the acquisition of the GE Security business for approximately $1.8 billion, including debt assumed of $32 million. The GE Security business supplies security and fire safety technologies for commercial and residential applications through a broad product portfolio that includes fire detection and life safety systems, intrusion alarms, and video surveillance and access control systems. This business, which has been integrated into the UTC Fire & Security segment, enhanced UTC Fire & Security's geographic diversity through GE Security's strong North American presence, while increasing total product and technology offerings. In connection with the acquisition of GE Security, United Technologies recorded approximately $600M of identifiable intangible assets and $1.1 billion of goodwill. The goodwill recorded reflects synergies expected to be realized through the combination of GE Security's products, resources and management talent with those of the existing UTC Fire & Security business to enhance competitiveness, accelerate the development of certain product offerings, drive improved operational performance and secure additional service channels. Additionally, the combined business has provided the opportunity for significant improvements to the cost structure through the rationalization of general and administrative expenditures as well as research and development efforts.

During 2010, United Technologies completed the acquisition of Clipper Windpower (Clipper), a publicly-held California-based wind turbine manufacturer. This investment was intended to expand United Technologies' power generation portfolio and allow the company to enter the wind power market by leveraging its expertise in blade technology, turbines and gearbox design. In the first half of 2010, United Technologies acquired a 49.9% equity stake in Clipper. In December 2010, United Technologies completed the acquisition of all the remaining shares of Clipper. The total cost of the investment in Clipper is approximately $385 million. In connection with this transaction, United Technologies recorded approximately $650 million of goodwill and identifiable intangible assets. Clipper was divested in 2012 - see info under "Divestures" below.

In August 2009, United Technologies completed the acquisition of the remaining 71% interest in GST Holdings Limited (GST), a fire alarm provider in China, for approximately $250 million bringing the company's total investment in GST to approximately $360 million. United Technologies recorded over $200 million of goodwill and approximately $100 million of identified intangible assets in connection with GST. With the acquisition of the remaining 71% of GST, UTC Fire & Security further strengthened its presence in the Chinese fire safety industry.




Divestitures



In accordance with conditions imposed for regulatory approval of the Goodrich acquisition, UTC had to dispose of the electric power systems and pumps and engine controls businesses of Goodrich. These businesses were held separate from UTC's and Goodrich's ongoing businesses pursuant to regulatory obligations. On October 16, 2012, UTC announced an agreement to sell the electric power systems business to Safran S.A. On March 26, 2013, UTC completed the sale to Safran for approximately $400 million. On January 18, 2013, UTC announced an agreement to sell the Goodrich pumps and engine controls business to Triumph Group, Inc. On March 18, 2013, UTC completed the sale to Triumph Group for approximately $200 million.

In 2012, the UTC Board of Directors approved plans for the divestiture of a number of non-core businesses. Cash generated from these divestitures was intended to be used to repay debt incurred to finance the Goodrich acquisition. These divestitures, when completed, were expected to generate approximately $3 billion in net cash, on an after-tax basis.

On December 22, 2012, UTC announced an agreement to sell UTC Power to ClearEdge Power. On February 12, 2013, UTC completed the disposition. The UTC Power disposition resulted in payments by UTC totaling $48 million, which included capitalization of the business prior to the sale and interim funding of operations as the acquiror took control of a loss-generating business. UTC has no continuing involvement with the UTC Power business.

On December 12, 2012, UTC announced an agreement to sell Pratt & Whitney Power Systems to Mitsubishi Heavy Industries (MHI). On May 17, 2013, UTC completed the sale to MHI for $432 million, excluding contingent consideration valued at approximately $200M, and entered into a long-term engineering and manufacturing agreement with MHI. The sale generated a pre-tax gain of approximately $193 million ($132 million after tax).

On July 23, 2012, UTC announced an agreement to sell P&W Rocketdyne to GenCorp Inc. On June 14, 2013, UTC completed the sale of substantially all operations of Rocketdyne to GenCorp for $411 million.

On December 13, 2012, UTC completed the sale of the legacy Hamilton Sundstrand Industrial businesses to BC Partners and The Carlyle Group for $3.4 billion. The sale generated a pre-tax gain of approximately $2.1 billion ($0.9 billion after tax).

On August 7, 2012, UTC completed the disposition of Clipper to a private equity acquirer. The disposition resulted in payments totaling approximately $367 million, which included capitalization of the business prior to sale, transaction fees, and funding of operations as the acquirer took control of a business with significant net liabilities.

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