DealZone

United Tech alone at the merger altar

July 21, 2009

In deal-making, even deep-pocketed bargain hunters can’t always call their own tune. They need to find someone willing to sell for a song.
 
United Technologies’ caught Wall Street’s attention in March when Chief Executive Louis Chenevert repeatedly said he was confident the company could find some “good values” on the merger front, at a time when U.S. stocks were plumbing 13-year lows.
 
Fast forward four months and the diversified U.S. manufacturer has barely touched its $2 billion 2009 takeover budget. What happened?
 
“We were hopeful, I think, earlier back in March when we saw equity prices so low that there would be opportunities for us to do some deals that, quite frankly, would be very accretive to the business,” United Tech Chief Financial Officer Greg Hayes told investors on a conference call on Tuesday. “It’s taking time and quite frankly it may take some more time. I think people’s expectations of price have not really come down to what the level of their stock price is and so we’re just going to wait this out.” Greg Hayes
 
Factoring out the money it has made on some divestitures, United Tech has spent just $153 million on takeovers so far this year. That money has gone for small bolt-on deals, like the June agreement to buy Turboden, an Italian maker of turbogenerator systems, and Pressure Products Industries, a Warminster, Pennsylvania-based company that makes industrial compressors.
 
After having been burned last year in an unsuccessful attempt to takeover Diebold Inc, a maker of automated-teller machines, the company has shied away from hostile bids.
 
So a blockbuster deal — like a takeover of Textron Inc.’s Bell helicopter unit, which United Tech earlier in the year hinted could be of interest — may simply not be in the cards this year, Hayes said.
 
“It’s going to be tough to get a lot of things done yet this year,” he told investors.
 
So what to do with the money?
 
“Share repurchase,” Hayes said. “I would expect to see that much more aggressive in the back half of the year.”

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