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.

the sting Milestone

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

Declaring commitment to ‘peace and stability’ for Libya, top UN envoy steps down as stress takes its toll

World Health Organisation and medical students: is there any room for improvement?

Euro-Mediterranean Assembly fixes its permanent seat in Rome

Subsidiarity and Proportionality: Task Force presents recommendations on a new way of working to President Juncker

Facts, not fear, will stop COVID-19 – so how should we talk about it?

GSMA Announces Latest Event Updates for 2018 “Mobile World Congress Americas, in Partnership with CTIA”

How Africa’s entrepreneurs are changing the direction of globalization

Rohingya cannot become ‘forgotten victims,’ says UN chief urging world to step up support

How we can survive the great COVID lockdown: IMF Chief Economist Gita Gopinath

Is Eurozone heading for disinflation?

EU Emergency Trust Fund for Africa: new actions of almost €150 million to tackle human smuggling, protect vulnerable people and stabilise communities in North Africa

The AI doctor won’t see you now

One migrant child reported dead or missing every day, UN calls for more protection

Why medicine is relevant to the battle against climate change

UN chief praises Malaysia’s death penalty repeal as ‘major step forward’

EU leaders prepare timetable and structure for EU budget negotiations

Guterres condemns killing of Bangladeshi peacekeeper in South Sudan, during armed attack on UN convoy

How secure is blockchain?

Track the spread of coronavirus around the world

Things are bad and getting worse for South Africa. Or are they?

Forward Agenda: What can we expect from 2019?

We need a reskilling revolution. Here’s how to make it happen

Syria: UN-backed watchdog says chemical weapon ‘likely used’ in February attack

4 lessons on human cooperation from the fight against Ebola

Natural gas: Parliament extends EU rules to pipelines from non-EU countries

Deutsche Bank: the next financial crisis is here and the lenders need €150 billion from taxpayers

Low productivity jobs continue to drive employment growth

European Citizens’ Initiative: A game of much publicity and one big lie

We finally have a life-saving vaccine for Ebola

First-ever UN report on disability and development, illustrates inclusion gaps

What does artificial intelligence do in medicine?

Practicing healthcare through a global lens

It ain’t over until Google says it’s over

EU citizens want more competences for the EU to deal with crises like COVID-19

Mergers: Commission opens in-depth investigation into proposed acquisition of DSME by HHIH

Revealed: danger and squalor for cleaners who remove human waste by hand

Scores killed in ‘barbaric’ attack on Mali village, UN chief urges restraint, calls for ‘dialogue’ to resolve tensions

We know ethics should inform AI. But which ethics?

Green light for VAT overhaul to simplify system and cut fraud

Joint UN, OSCE engagement can address crisis in Ukraine, other ‘dark spots of conflict’ in Europe

Governments, businesses ‘walk the talk’ for investment in sustainable development: UN forum

Syria: Civilians caught in crossfire, UN refugee chief urges Jordan to open its border

Commission launches new edition of the Cultural and Creative Cities Monitor 2019

UN, African Union make significant joint commitment to global health

Will the French let Macron destroy their party political system?

‘Complacency is still strong’ over stopping genocide, says top UN adviser

Climate Change: a challenge yet to be tackled in medical schools

UPDATED: Guterres condemns armed attack against UN peacekeepers in Mali

MEPs debate EEAS report on disinformation activities related to COVID-19

These are the 4 most likely scenarios for the future of energy

Investment Plan for Europe: European Investment Bank to provide BioNTech with up to €100 million in debt financing for COVID-19 vaccine development and manufacturing

Serious concerns over Sahel, require ‘urgent action’: Senior UN Africa official

This project is turning abandoned fishing gear into volleyball nets

Eurozone retail sales fall shows recession

Citing public anger and youth activism, OECD Secretary-General urges governments to heed calls for climate action

How to provide health education and thus create better health systems

France asks help from Germany but it will not be for free

Sustainable Development Goals: making the world a better place

Partnerships with civil society and youth ‘essential’ for a future that leaves no one behind: General Assembly President

UN team aids Samoa response to deadly measles epidemic

More Stings?

Advertising

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