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

Advertising

the European Sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

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

As rural communities age, their public transport is shrinking. It’s time to fix this

Russia to cut gas supplies again: can the EU get back to growth without a solid energy market?

Women vital for ‘new paradigm’ in Africa’s Sahel region, Security Council hears

Transition between education and employment: how the internship culture is threatening the foundations of our education

Talent is worldwide. Opportunity is not. How can we redistribute it?

From Russia with love: Brussels and Moscow close to an agreement on Ukraine’s gas supplies

Confronting neo-mercantilism: why regulation is critical to global trade

A Sting Exclusive: “Digital and mobile technologies are helping to achieve an economic success in Spain”, the Spanish Secretary of State for Telecommunications and Information Society Víctor Calvo-Sotelo reveals to the Sting at Mobile World Congress 2015

Charges against Baha’i in Yemen must be dropped: UN experts urge release of detainees

Towards a European Republic

OECD household income up 0.7% in first quarter of 2018, outpacing GDP growth

EU leaders agree on 2030 Climate and Energy Package: is “flexible” brave enough?

Food safety: more transparency, better risk prevention

Is euro to repeat its past highs with the dollar?

Solutions for cultural understanding: medical students’ perspective

This is why Dutch teenagers are among the happiest in the world

As monsoon rains pound Rohingya refugee camps, UN food relief agency steps up aid

EU’s social crisis and unemployment to deteriorate

This is the world’s biggest mental health problem – and you might not have heard of it

A Sting Exclusive: “Doing ourselves a favour”, Vice President Dombrovskis underscores that this time growth has to come from within the EU

Ebola: EU provides an additional €30 million to tackle the outbreak in the Democratic Republic of Congo

Interview with ourselves: the mental health of health professionals

Doctors are humans too: the benefits of embracing your mental status

Women-Friendly Spaces for Rohingya refugees: A place for protection and care

Commission: Do it like the Americans in the food sector

President Juncker temporarily transfers portfolio responsibilities following departure of two Members of the European Commission

Latest tragedy in the Mediterranean claims over 100 lives – UN refugee agency

rescEU assets mobilised to help Greece fight devastating forest fires

Tuesday’s Daily Brief: Venezuela-Colombia baby breakthrough, Italy piles on rescue boat pressure, States must combat hate, Kashmir rights latest and a musical plea to combat CAR hunger

Eurozone: Even good statistics mean deeper recession

More than four in 10 women, live in fear of refusing partner’s sexual demands, new UN global study finds

Conflict prevention, mediation: among ‘most important tools’ to reduce human suffering, Guterres tells Security Council

3 reasons why most Africans aren’t on the internet – and how to connect them

Further reforms needed for a stronger and more integrated Europe

25 years after population conference, women still face challenges to ‘well-being and human rights’, says UN chief

70 years on, landmark UN human rights document as important as ever

‘Huge’ stakes, ‘daunting’ job to tackle gender-based violence, UNICEF chief tells ground-breaking conference

South Africa still hasn’t won LGBTQ+ equality. Here are 5 reasons why

Commission launches two projects to support cooperation and innovation in Romanian regions and cities

3 ways to fight stress at work

EU Top Jobs summit ended with no agreement: welcome to Europe’s quicksand!

EU to spend €6 billion on youth employment and training futile schemes

The good news on pensions: sustainable equals profitable

Women must be at ‘centre of peacekeeping decision-making’, UN chief tells Security Council

Leading Palestinian legislator calls for ‘new international engagement’ in two-state solution

The Ukrainian crisis to destabilize Europe and the world for a long time

Millennials aren’t voting – but these young leaders have a plan to change that

The role of students in a migration crisis in Roraima, Brazil

IPCC reports devastating climate consequences; US in denial while EU does not fully support the 2050 net zero emissions target

Spotlight Initiative – EU and UN fight against domestic violence in the Pacific region

Healing of ozone layer gives hope for climate action: UN report

End ‘shame, isolation and segregation’ of fistula sufferers, urges UN reproductive health chief

The European Union and Central Asia: New opportunities for a stronger partnership

The health of the human being in coexistence with a transformative biosphere

‘Rare but devastating’ tsunamis underscore need for better preparation, UN chief urges on World Day

Service and Sacrifice: Guinean peacekeepers make their mark in Mali

EU–US: What is the real exchange in a Free Trade Agreement?

€5 billion of EU energy efficiency project money spent on “comfort”

To flourish in the Fourth Industrial Revolution, we need to rethink these 3 things

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