The EU Commission approves UTC’s acquisition of Rockwell Collins under conditions

A geared turbofan at Pratt & Whitney's production hub in West Palm Beach (copyright: Pratt & Whitney - a UTC Company- 2018; Source: Pratt & Whitney's website, media center)

A geared turbofan at Pratt & Whitney’s production hub in West Palm Beach (copyright: Pratt & Whitney – a UTC Company – 2018; Source: Pratt & Whitney’s website, media center)

Last week, the European Commission approved, under the EU Merger Regulation, the acquisition of Rockwell Collins by United Technologies Corporation (UTC) in the aerospace sector. The EU watchdog clarified that the decision is conditional to the divestment by UTC of businesses in actuators, pilot controls, ice protection and oxygen systems, which is something that UTC has granted, ultimately paving the way to the mega-merger. The proposed $30 billion acquisition, first announced in September last year, would bring together two aerospace giants, creating a new player in the top echelon of suppliers to Boeing, Airbus, Bombardier and other plane makers.

Background

Last September, after months of rumours, the two American multinational companies Rockwell Collins Inc. and United Technologies Corporation announced with a joint statement they had reached a “definitive agreement” under which United Technologies will acquire Rockwell Collins for $140.00 per share, in cash and UTC stock. UTC Chairman and Chief Executive Officer Greg Hayes said back then: “This acquisition adds tremendous capabilities to our aerospace businesses and strengthens our complementary offerings of technologically advanced aerospace systems”.

“We are extremely pleased to announce this compelling transaction with UTC which is a testament to the value we have created for Rockwell Collins’ employees, customers and shareowners”, Kelly Ortberg, Chairman, President and Chief Executive Officer of Rockwell Collins commented. On January 11 this year then, the two parts announced Rockwell Collins’ shareowners had “overwhelmingly approved” the proposed acquisition. An official Rockwell Collins press release said that more than 96 percent of all votes cast, representing more than 72 percent of all shares of common stock outstanding on the record date for the special meeting, were “in favour of the transaction”.

Competition concerns

Despite such enthusiastic initial phase, the proposed acquisition had to face a few hiccups and hurdles. Many sources have indeed reported major players in the aviation industry, such as Boeing and Airbus, expressing wide concerns over the merger. UTC and Rockwell Collins produce indeed components that are highly complementary, embracing a wide range of elements of an aircraft combined: the first one focuses on products such as power generation, propulsion systems and landing systems, while the latter focuses on avionics and different cabin interior products.

Analysts said the combined company could make more than 50 percent of the systems content on a Boeing 787 aircraft by dollar value. A source close to Airbus had told Reuters it maintained concerns about the merger. Also, problems at Pratt & Whitney have delayed European aircraft deliveries, and Airbus has publicly warned UTC to focus on delivering jet engines on time. After those initial concerns, though, Boeing gave its consent to the deal last month, after it signed a new supply deal with both companies that it described as a “win-win” for all sides, as reported by the Financial Times.

EU’s watchdog ok-go

So, after Boeing’s assent to proceed, UTC last week cleared one of the potentially biggest hurdles on the way to finalise the mammoth deal with Rockwell Collins, and won the EU’s approval to go ahead. The European Commission formally said concessions offered by UTC addressed its concerns about the deal, and it announced it approved the takeover of Rockwell Collins by UTC.

“When we take a trip on a plane, we usually don’t think about all the different components that go into building the aircraft. UTC and Rockwell Collins are two of the biggest suppliers of these components to aircraft makers worldwide”, Commissioner Margrethe Vestager, in charge of competition policy said last week. “We need to ensure that competition is preserved for all of them”, the Commissioner also declared.

The investigation

In particular, the Commission was concerned that the transaction, as originally notified, would have reduced competition in the markets for trimable horizontal stabiliser actuators (THSAs), certain pilot controls (throttle quadrant assemblies and rudder brake pedal systems), pneumatic wing ice protection and oxygen systems. In its official statement, which was released on May 4, the Commission  concluded that other overlaps and vertical links between UTC and Rockwell Collins’ activities “did not lead to any competition concerns, mainly because of the existence of a sufficient number of alternative suppliers”.

The EU’s regulatory authority said it also investigated whether the merged entity would have the ability and incentive to use components in its portfolio to shut out competitors, through practices such as bundling or tying, and last week it said it concluded that the merged entity would have “neither the market power nor the incentives to engage in such strategies and harm competition”.

UTC’s concessions

The commitment by UTC to sell parts of the business, in a bid to shorten the distance with the requests by the European Commission, played a substantial role. “We can allow this merger to go ahead because in all the markets where we raised concerns, UTC has committed to divest activities covering the entire overlap between the two companies”, Commissioner Vestager said last week. UTC has indeed declared it has agreed to sell two research businesses in oxygen systems as well as Rockwell Collins’ entire global THSA and pilot control businesses, located at several sites mainly in the US and Mexico, and Rockwell Collins’ entire global business in ice protection, located in a single facility in the US.

“Therefore, the Commission concluded that the proposed transaction, as modified by the commitments, would no longer raise competition concerns in the European Economic Area (EEA)”, the EU’s watchdog declared last week. “The decision is conditional upon full compliance with the commitments”, the statement by the Commission added.

Big players

Headquartered in Cedar Rapids, Iowa, Rockwell Collins Inc. manufactures and supplies aviation and integrated solutions for both commercial and government applications. It also manufactures and supplies a variety of aircraft cabin interior products. UTC is headquartered in Farmington, Connecticut. It provides high-technology products and services for the building systems and aerospace industries worldwide. The UTC group comprises Otis Elevator Company, UTC Climate, Controls & Security, Pratt & Whitney, and UTC Aerospace Systems.

The deal is expected to create one of the world’s largest aerospace equipment suppliers. The two parts have said the transaction is projected to close by the third quarter of 2018.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Grexit no longer a threat but how to manage a “tutti frutti” government if not with fear?

European Confederation of Junior Enterprises hosts in Geneva the Junior Enterprise World Conference

UN underscores the need to celebrate indigenous peoples, not confine them

Drought in Europe: Commission presents additional measures to support farmers

Global Leaders Take The Stage At MWC Shanghai 2019, in association with The European Sting

EFSF/ESM boss tells half truths about Troika’s doings

Here’s how data could make our cities safer

Barriers to trade: as protectionism rises, EU continues opening up export markets for European firms

Why city residents should have a say in what their cities look like

Everything you need to know about water

Khashoggi trial in Saudi Arabia falls short of independent, international probe needed: UN rights chief

Where is Egypt leading the Middle East and the Mediterranean economy?

These countries are ranked highest – and lowest – for human development

Erdogan’s electoral win on a ‘me or chaos’ dilemma means trouble for everybody

Paris, Washington, IMF against Berlin and ECB on money and interest

Lack of access to clean water, toilets puts children’s education at risk, says UN

On our way to China

Security Council should ‘nurture’ Colombian consensus against return to violence, top UN official urges

Climate change is destroying a barrier that protects the US from hurricanes

The 27 EU leaders did nothing to help May unlock the Brexit talks

Commission tries to solidify the EU statistical system

Parliament sets up plan to fight the 3,600 criminal rings of EU

Scotland wants to create an ethical stock exchange (Post Brexit)

European Development Days 2013

Merkel refuses to consider the North-South schism of Eurozone

On Google antitrust case: “Let’s face it, some companies want to hurt Google and it goes as simple as that”

ZTE @ MWC14: ZTE excels in all areas at this year’s Mobile World Congress

‘Nothing left to go back for’: UN News hears extraordinary stories of loss, and survival as Mozambique rebuilds from deadly cyclones

Mainland Europe adopts Germanic cartel business patterns

What will the US look like under Trump? Was his election campaign a big scam?

State aid: Commission approves €431 million public support for cleaner transport in German cities

Google prepares to final EU judgement over Android antitrust case

MEPs want robust EU cyber defence and closer ties with NATO

The creation and maintenance of smoke-free public spaces in the UK

Davos participants call for digital trade deal

Greening the Belt and Road is essential to our climate’s future

The opportunity of studying Medicine abroad

New York City has a plan to fight fast fashion waste. Here’s how it works

Digital Single Market: New EU rules for online subscription services

UN food relief agency airlifts aid to DR Congo province hit by Ebola outbreak

Colombia: ‘Terrible trend’ of rights defenders killed, harassed; UN calls for ‘significant effort’ to tackle impunity

Kellen Europe Hosts EuroConference 2016

AI-assisted recruitment is biased. Here’s how to make it more fair

How civil society must adapt to survive its greatest challenges

European Parliament marks EU accession prospects for Serbia and Kosovo

Ensure safety of responders UN Security Council urges, amid worsening DR Congo Ebola outbreak

Resolving banks with depositors’ money?

UN postal agency ‘regrets’ US withdrawal

Some Prevailing Arguments and Perceptions over the South China Sea Issue Are Simply Wrong

‘End the ongoing atrocities’ against people with albinism in Malawi, say UN rights experts

Manufacturers Get Smarter for Industry 4.0

Zeid calls for ICC probe into Myanmar Rohingya crisis

New York and London mayors call on cities to divest from fossil fuels

The COP24 Agreement: Yes, it happened at last

MEPs take stock of the EU’s foreign, security and defence policy priorities

OECD joins with Argentina to fight financial crime

European Commission: Does Apple, Starbucks and Fiat really pay their taxes?

How fungi could save the world

The economic cost of anti-vaccination movements in Italy

MWC 2016 LIVE: Xiaomi looks to revive growth with flagships

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s