United Tech Seeks Financing for Big Deal: Sources

Reuters With

United Technologies is lining up financing in the double-digit billions of dollars to support a major acquisition in the U.S., according to two people with direct knowledge of the matter.

One source initially said the U.S. industrial conglomerate was planning to tap the credit market for funds that could top $20 billion, but CNBC has learned the company's financing will be well below that amount.

Shares of Tyco International, which had been up as much as 5 percent early in the day on speculation it could be a potential target, fell sharply after CNBC reported the credit line would not be sufficient to make an offer for the company.

Sources declined to say which company United Technologies planned to buy, as terms of the offer are still being worked out and any potential bid could still fall apart. The sources asked not to be identified as the plans are confidential.

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.

Aerospace supplier Goodrich, which has a market value of nearly $11 billion, and smaller rival Rockwell Collins, which has a market value of $8 billion, are seen as attractive targets for United Technologies, according to people familiar with the industry but not directly involved in the matter.

Cessna aircraft maker Textron, and large industrial conglomerates, such as Tyco and Honeywell International, have also over the years been mentioned as possible targets.

United Technologies Chief Executive Louis Chenevert has repeatedly said the company is interested in doing more deals. But Chief Financial Officer Greg Hayes and he have complained that they have found "substantial disconnect" between what they are willing to pay and what potential sellers expect.

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.