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United Technologies CEO says $23 billion Rockwell deal 'is not about closing a lot of factories'

  • "This is not about closing a lot of factories," United Technologies chief Greg Hayes tells CNBC.
  • United Tech agreed to buy aircraft parts manufacturer Rockwell Collins for $23 billion in the biggest aerospace deal in history.
  • Hayes will stay on as CEO of the combined company.

United Technologies Chairman and CEO Greg Hayes told CNBC on Tuesday the deal to buy Rockwell Collins "is not a job cuts story."

"This is not about closing a lot of factories," Hayes said on "Squawk on the Street."

United Technologies stock was down 3.5 percent on Tuesday, a day after the jet engine maker agreed to buy aircraft parts manufacturer Rockwell Collins for $23 billion in the biggest aerospace deal in history. Share prices of Rockwell, which closed at $130.61 on Friday, were getting a small bump on Tuesday.

United Technologies, a Dow component, will also assume $7 billion in Rockwell debt.

Hayes, who will stay on as CEO of the combined company, told CNBC that Rockwell has been on United Tech's radar for a couple of years, and he called it "the right deal."

Rockwell CEO Kelly Ortberg will head a new unit named Collins Aerospace Systems.

United Technologies Chairman and CEO Greg Hayes gives an interview to CNBC on the floor of the New York Stock Exchange (NYSE) in New York, September 5, 2017.
Brendan McDermid | Reuters
United Technologies Chairman and CEO Greg Hayes gives an interview to CNBC on the floor of the New York Stock Exchange (NYSE) in New York, September 5, 2017.

Hayes also said the overall aerospace business is growing dramatically, and with that growth comes pressure from customers to reduce costs and innovate.

"And having scale in the aerospace business is absolutely essential to bring value to the customers that they expect," he said. "We'll have the abilities to do things that others can't."

Hayes predicts that 30,000 new aircraft will be delivered in 15 years.

Under the deal, Rockwell shareholders will receive $140 per share in UTX stock and cash, split between $93.33 in cash and $46.67 in stock.

The price tag represents a 17.6 percent premium to Rockwell's $119 per share before news of the talks emerged on Aug. 4. Hayes said he expects the deal to close within 12 months, saying the antitrust risk is low.

On the premium price tag, Hayes said: "When you're buying beachfront property ... I think it's a pretty good deal."

Hayes also discussed the possibility of splitting up the new company down the road.

"Once we get done with this deal and get the integration complete and pay down some debt, we'll be able to take a look at a full range of portfolio options," Hayes said. "If we continue to see a big disconnect between what we think is [the] intrinsic value of UTC and the actual stock price, we'll look to do something different."

"That's what I've committed to our board and shareholders. If it doesn't work together, we'll take a look at splitting it up," he added.

—Reuters contributed to this report.

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