United Technologies is in talks to buy aerospace supplier Goodrich and a deal could come as early as next week, sources tell CNBC.
The offer is expected to be between $110 and $125 a share. Goodrich shares ended Friday at $92.89 and then soared more than 20 percent in after-hours trading. Click here to get the latest after-hours quote.
There had been buzz all day about United Technologies lining up financing in the double-digit billions of dollars to make an acquisition in the U.S. and a several companies, including Goodrich, saw their stocks jump in regular trading.
Tyco International was among the discussed takeover targets and saw its stock up as much as 5 percent at one point but the stock ended down 1.4 percent on the day. United Technologies' credit line wouldn't be big enough to make such an acquisition, sources told CNBC.
Another large conglomerate, Honeywell International, had also been kicked around as a possible takeover target, as well as smaller rival Rockwell Collins and Cessna aircraft maker Textron.
United Technologies spokesman John Moran declined to comment. The company has a market value of $67 billion and had $5.4 billion in cash as of June 30.
Chief Executive Louis Chenevert, who came up through the company's aerospace business and headed before taking the top job at corporate, holds up his $1.8 billion acquisition of General Electric's security business as the sort of deal he would like to replicate in the near future.
In 2008, United Technologies made a hostile $2.64 billion takeover offer for Diebold, a maker of automated teller machines. That effort was ultimately fruitless, and Chenevert has since said he would be reluctant to go hostile again after that experience.
Not Afraid of Bigger Bets
For most of the past five years, United Tech has budgeted $1.5 billion to $2 billion per year for takeovers, regularly making deals that are small enough that the Hartford, Connecticut-based company does not disclose their size.
Company officials have repeatedly said they are interested in more deals, and in July Chief Financial Officer Greg Hayes suggested United Tech would not shy away from larger targets.
"You're going to see us put our balance sheet to work, you're going to see us put more cash to work on the M&A side," Hayes said. "That's where I think a big piece of growth is going to come from in the next few years; it's going to come from the M&A."
United Tech officials have expressed particular interest in targets to merge into its Fire and Security and Hamilton Sundstrand security and aircraft components arms. Both divisions are below Chenevert's $10 billion annual revenue target.
Acquiring Rockwell, a big supplier to United Tech, could help the company weather the expected downturn in defense spending in the United States and Europe by giving it a larger share of the smaller pie that will remain, according to industry executives.
U.S. congressional leaders last month agreed to cut $350 billion from national security spending over the next decade.
For some veterans of the industry, the decline in defense spending brings to mind the late 1980s and early 1990s, when top U.S. defense officials told companies they should consider joining forces to cut costs.
"This definitely feels like a return to those times," said one industry executive. "There are a lot of second-tier companies that will very likely be absorbed."
Being acquired by a conglomerate like United Tech could allow the target company to retain some independence. United Tech has five divisions that operate under their own brand names, including Pratt & Whitney and Hamilton Sundstrand.