GR Goodrich Corp. (The)

Goodrich Corporation (GR) shareholders at the special meeting held on March 13, 2012 unanimously voted and approved the proposed merger with United Technologies Corp. (UTX). However, as stated earlier the deal is expected to be completed by the first half of 2012.

On completion of the merger, Goodrich will become a wholly owned subsidiary of United Technologies and the former’s shareholders will receive $127.50 in cash, for each share of Goodrich owned. This reflects a 47.4% premium to the closing stock price on September 15, 2011(the last day of trading before the market rumors of the acquisition). The transaction has a total enterprise value of approximately $18.4 billion, assuming approximately $1.9 billion of net debt. 

Goodrich reported a strong finish to its last fourth quarter and  fiscal 2011 operations as a standalone company. Goodrich reported fiscal 2011 earnings per share of $6.33 versus $4.51 in the year-ago quarter and the Zacks Consensus Estimate of $5.99. The year-over-year increase reflects higher sales growth in all of the company's major market channels, strong operational performance, cost reduction initiatives, higher favorable changes in estimates for certain long-term contracts and lower pension expense.

In fiscal year 2011, total operating revenue was $8,074.9 million versus $6,966.9 million in fiscal year 2010 and the Zacks Consensus Estimate of $8,069.0 million.

Going over to United Technologies, the Goodrich acquisition comes at an opportune time, just as commercial aerospace OEMs are increasing production. Therefore, we expect the company to see revenue synergies from the combination of Goodrich and Hamilton Sundstrand (the existing aerospace business). 

Further, fiscal 2012 is expected to be a year of transformation for United Technologies, as just a week after the announcement of the Goodrich acquisition, the company declared plans to restructure its business portfolio. The company said it would combine the Carrier heating and cooling unit and its Fire & Safety business into one division called UTC Climate, Controls and Security Systems.

Both United Technologies and Goodrich currently hold a Zacks Rank # 3 which implies a short-term ‘Hold’ rating on the stocks.

 
GOODRICH CORP (GR): Free Stock Analysis Report
 
UTD TECHS CORP (UTX): Free Stock Analysis Report
 
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