By Kate Linebaugh
Of THE WALL STREET JOURNAL
Seeking to maintain its credit rating while not angering
shareholders, United Technologies Corp. (UTX) changed its financing
plans for the $16.5 billion acquisition of aircraft-components
maker Goodrich Corp. (GR), announcing the sale of several units
including its Rocketdyne rocket-engine business.
United Technologies, which makes Otis elevators, Pratt &
Whitney aircraft engines and Carrier air-conditioning systems,
expects to raise about $3 billion by the end of the year through
the sale of the businesses, which also include its Clipper
Windpower wind-energy business and its Hamilton Sundstrand
Industrial businesses.
"Back in September when we initially laid out the financing
plans, it was pretty simple: We were going to borrow about $12.5
billion and issue about $4 billion in equity, and nobody liked it,"
Chief Financial Officer Greg Hayes told investors Thursday.
Now, United Technologies plans to raise $750 million selling
Rocketdyne, $1.4 billion for the industrial businesses and $300
million for Clipper, and isn't ruling out other divestitures.
By selling those businesses and using $3 billion in cash, the
Hartford, Conn., company expects to lower the amount of equity it
will sell to fund the deal from about $4 billion, when the deal was
announced in September, to $1.5 billion in bonds that will convert
into stock when they mature. United Technologies will reduce its
borrowing to about $9 billion.
The company's shares were down 22 cents at $86.59 in
midafternoon trading. In funding the Goodrich purchase, United
Technologies' biggest acquisition ever, the company is balancing
the desire of its shareholders to limit the sale of new stock with
the need to limit borrowing to maintain its credit rating.
Last month, Moody's Investors Service said it could cut United
Technologies' A2 credit rating, five steps above junk, citing
concerns about the possibility the industrial conglomerate could
use less equity in funding the Goodrich acquisition.
The company's deal to buy Goodrich is expected to close by the
middle of the year after recently winning an overwhelming vote of
approval from Goodrich shareholders.
In selecting businesses to divest, Mr. Hayes said Rocketdyne
wasn't core and that without a national space policy, growth would
be limited. He described the company's 2010 investment in wind
power company Clipper as a mistake.
"We bought into this business with a thought that there was
going to be a renewable energy mandate in this country, and there
has not been one," he said. The proliferation of natural gas supply
and lower prices have eroded the economics of wind power.
The company is working with Goldman Sachs Group Inc. to sell the
industrial businesses in Hamilton Sundstrand, which include meters,
pumps and compressors.
United Technologies also said it expects a weak first quarter in
some of its businesses like Otis and its climate control business
this year. And the company also increased its restructuring charges
for 2012 to $350 million from as much as $200 million anticipated
previously.
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