COL Rockwell Collins, Inc. (delisted)

By Thomas Gryta 

Activist investor Third Point LLC detailed its case for breaking up industrial conglomerate United Technologies Corp., and said it has shared its views with the company's board.

The Farmington, Conn., company is already planning a portfolio review that will examine a split, a process it expects to complete by year-end. The idea of a breakup gathered momentum around September when United Technologies agreed to buy Rockwell Collins for $23 billion.

United Technologies owns one of the world's biggest jet-engine makers, Pratt & Whitney, along with Otis elevators and Carrier air conditioners, and the conglomerate and Third Point are talking in similar terms about a possible breakup.

In separating, Rockwell would merge with UTC's aviation-services division and Pratt & Whitney engines division to form a large aviation company, while both the Climate, Controls & Security division and Otis elevators business would become separate companies.

"To reverse its years of underperformance and realize the full potential of its franchise assets, we believe UTC should split into three focused, stand-alone businesses," Daniel Loeb's Third Point said in a letter to investors Friday. The firm sent a more detailed letter to the board, continuing a trend of activists pushing for change at large conglomerates.

"While UTC disagrees with several of the assertions contained in the Third Point letter, the company is always open to the input of shareholders," the company said. It noted that some of Third Point's points have been discussed publicly. "While it is our policy not to comment on specific discussions with individual investors, we are committed to maintaining constructive dialogue with shareowners representing all points of view."

United Technologies CEO Greg Hayes has openly addressed the idea of a breakup and highlighted some of the factors around the decision. In March, he described potential one-time costs of $2 billion to $3 billion for dividing into three units and said such a process would take 18 to 24 months.

The portfolio review is set to begin after the Rockwell Collins deal closes over the summer. United Technologies, formed in 1934, has a market value of $94 billion. Its stock is down 6.5% this year and 1.4% in the past 12 months.

Third Point bought an undisclosed stake in the fourth quarter, joining fellow activist William Ackman's Pershing Square Capital Management LP.

Third Point also has been invested in Honeywell International Inc., where it pushed for a spinoff of its aerospace business but ultimately blessed plans to separate two other units.

In its Friday letter, Third Point contended that some of the estimates made by Mr. Hayes around breakup costs are too high, "showing a lack of precision that belies a serious approach to considering how best to create shareholder value."

Third Point said that Honeywell and Danaher Corp. have shown much lower costs for major spinoffs.

Write to Thomas Gryta at thomas.gryta@wsj.com

(END) Dow Jones Newswires

May 04, 2018 13:56 ET (17:56 GMT)

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