United Technologies in talks to acquire Goodrich

United Technologies Corp is in talks to buy aerospace equipment maker Goodrich Corp, as it looks to expand through a major acquisition, according to three people with knowledge of the matter.

A deal may be announced as soon as next week, said one of the people, who weren’t authorised to speak publicly. Goodrich is the most likely candidate of takeover targets being studied by Hartford, Connecticut-based United Technologies, one person said. Goodrich jumped 23 per cent in late trading yesterday, adding to a market value of $11.6 billion.

United Technologies is seeking to raise financing, the people said. Chief Executive Officer Louis Chenevert signalled his interest in acquisitions in March when he named William Brown as senior vice president of corporate strategy. Brown completed more than 40 purchases as head of UTC Fire & Security.

“The fit is not bad,” said Howard Rubel, an analyst with Jefferies & Co in New York. “From a distribution channel basis, from a mentality basis, from a customer focus basis, it’s all there.”

Talks continue with Charlotte, North Carolina-based Goodrich, and a deal may not be reached, the people said.

John Moran, a spokesman for United Technologies, declined to comment. Goodrich’s Andrew Martin didn’t immediately respond to a voice mail and e-mail request for comment about the takeover talks.

HELICOPTERS, NACELLES
United Technologies’ aviation businesses include Hamilton Sundstrand aerospace electric systems, helicopter maker Sikorsky Aircraft and Pratt & Whitney, a producer of jet engines. Goodrich is the world’s biggest manufacturer of landing gear, and its products include nacelles, the casings that house jet engines, and de-icing systems used on planes.

Goodrich rose to $113.89 in late trading yesterday from a close of $92.89 in New York Stock Exchange composite trading. Rockwell Collins Inc, Textron Inc and Tyco International Ltd also gained yesterday on speculation they may be targets.

United Technologies fell 11 cents to $75.50 and was little changed after the end of regular trading. The company closed with a market value of $68.6 billion, according to data compiled by Bloomberg.

An acquisition of Goodrich may be valued at more than $17 billion, including $1.9 billion of net debt, based on previous deals in the US aerospace and defence industry. That’s about $122 a share.

INDUSTRY TAKEOVERS
Takeovers in the sector greater than $500 million in the last five years have fetched a median of 12.3 times earnings before interest, taxes, depreciation and amortisation, according to data compiled by Bloomberg. Goodrich had ebitda of $1.4 billion in the past 12 months.

Goodrich would be the largest acquisition attempted by United Technologies since 2000, when it sought to buy Honeywell International Inc only to be outbid by General Electric Co. (GE) GE’s $45 billion deal was later rebuffed by the European Union.

Chenevert hasn’t made a large aerospace purchase since becoming CEO in 2008 after running Pratt & Whitney. Adding commercial aerospace revenue would be a boost after the engine unit’s geared turbofan model failed to win placement on Boeing’s upgraded 737, the world’s most widely flown jetliner. United Technologies had $5.4 billion in cash and near-cash items at the end of last quarter, and posted sales of $54.3 billion in 2010. Goodrich reported revenue of $6.97 billion last year.

GOODRICH HISTORY
CEO Marshall Larsen has led Goodrich since April 2003. He joined the former BF Goodrich Co in 1977 and rose through the ranks, adding the chairmanship six months after taking the top spot. Benjamin Franklin Goodrich founded the rubber maker bearing his name in 1870.