TheChek News Flow

Holcim Sees Special Div. as a Negative for Merged Company: UBS
2015-03-13 07:00:19.570 GMT


By Gaurav Panchal
(Bloomberg) -- Holcim believes special dividend for Holcim
shareholders would have negative impact on balance sheet of
merged company, UBS says following meeting with Holcim CFO
Thomas Aebischer at the UBS Investors’ Club yday night.
* UBS says following meeting that only adjustment factor is a
non-cash change in ratio
* Holcim pointed to 1:1 exchange ratio in merger agreement,
which has no adjustment mechanism: UBS
* Holcim said co. is “listening to shareholders” because
Holcim needs a 2/3 majority of its shareholders
attending EGM in order to approve the capital increase
needed to acquire Lafarge shares: UBS
* Holcim said co. is “listening to shareholders” because
Holcim needs a 2/3 majority of its shareholders
attending EGM in order to approve the capital increase
needed to acquire Lafarge shares: UBS</li></ul>
* Coming weeks should bring more clarity on whether the
exchange ratio will be adjusted, which requires re-
negotiation of the merger contract: UBS
* Probability of failure is low: UBS
* Current share prices imply a ~9% re-pricing given the
current trading of 1.09x HOLN/LG: UBS
* March 12: Holcim, Lafarge Said to Discuss Changing Terms for
Cement Merger Link


Link to Company News:{HOLN VX <Equity> CN <GO>}
Link to Company News:{LG FP <Equity> CN <GO>}

For Related News and Information:
First Word scrolling panel: {FIRST<GO>}
First Word newswire: {NH BFW<GO>}

To contact the reporter on this story:
Gaurav Panchal in London at +44-20-3525-0511 or
gpanchal2@bloomberg.net

To contact the editor responsible for this story:
Brian Lysaght at +44-20-3525-7908 or
blysaght@bloomberg.net

United Technologies Sikorsky Split Is Prelude to Deals: Real M&A
2015-03-12 19:51:16.7 GMT


(For a Real M&A column news alert: {SALT REALMNA <GO>}.)

By Brooke Sutherland and Richard Clough
(Bloomberg) -- United Technologies Corp.’s plan to part
with Black Hawk helicopters may be only the beginning.
The $110 billion industrial conglomerate announced
Wednesday that it will sell or spin off Sikorsky Aircraft, a
unit valued on average by analysts at about $8 billion as a
stand-alone. Cutting ties with Sikorsky -- its lowest-margin
business -- may help United Technologies bridge the 13 percent
gap between its stock price and the roughly $137-a-share value
that some analysts assign to its underlying assets.
Acquisitions may be next on the agenda for United
Technologies, whose biggest deal was the more than $16 billion
takeover of aerospace supplier Goodrich Corp. in 2012. Chief
Executive Officer Greg Hayes has said he’s focusing on purchases
of $5 billion or larger. Possible targets could include lock
maker Allegion Plc at $5.6 billion or even fire-detection and
security giant Tyco International Plc at $18 billion.
This is probably not a “one and done,” said Chip
Pettengill, principal and fund manager at Bahl & Gaynor
Investment Counsel Inc., which oversees about $13 billion
including United Technologies stock. “There’s more to come. He
will probably be looking to make some acquisitions after this.”
Hayes may only spend about $1 billion this year and could
do more share buybacks instead if targets are too expensive, he
said Thursday at a meeting with investors in New York. Even so,
the Hartford, Connecticut-based company has already built up its
biggest cash stockpile in about two years, and splitting off
helicopter-maker Sikorsky should give it more financial
firepower.

Separate Business

Sikorsky had about $7.5 billion of revenue last year, most
of which came from defense contracts. Jettisoning it will remove
a low-return business and reduce United Technologies’ exposure
to the volatile U.S. military budget, said Pettengill.
Sikorsky, which makes the helicopters that carry U.S.
presidents, is “as much of a stand-alone, separate business as
anything they have,” he said in a phone interview. “It makes a
lot of sense” and there’s “value creation” for shareholders.
United Technologies will review options for the business
and make a decision this year on whether to sell it or spin it
off. The company looked at splitting the building and
industrial-systems division from the aerospace operations and
decided that doing so wouldn’t unlock enough value to make the
process worthwhile, Hayes said on a call with reporters
Wednesday.
The company will also use its cash -- which stood at $5.2
billion at the end of 2014 -- to buy back $3 billion in shares,
and is moving its headquarters to Farmington, Connecticut.

Sikorsky Value

Sikorsky could be valued at about $10 billion in a sale,
based on the revenue multiples paid for recent similar
transactions, according to Joel Levington, an analyst at
Bloomberg Intelligence. That would make it the biggest takeover
of an aerospace and defense company since the Goodrich deal,
according to data compiled by Bloomberg.
A spinoff of Sikorsky may be more likely at this point,
though. While there’s probably a long list of buyers that would
be interested, Sikorsky has been part of United Technologies
since 1929 so any sale of the helicopter maker will leave it
with a huge tax bill, said Peter Arment, an analyst at Sterne
Agee Group Inc.
Instead of paying an additional premium to offset the tax
losses, acquirers could bide their time and approach Sikorsky
after the spinoff process is complete. Defense companies
Northrop Grumman Corp. and Lockheed Martin Corp. would be two
logical buyers, Bahl & Gaynor’s Pettengill said.

More Cash

Whether it chooses a sale or a spinoff, separating from
Sikorsky should increase United Technologies’ capacity for
dealmaking. The spinoff could unlock as much as $3 billion in
cash through a dividend to the parent company, Nick Heymann, a
New York-based analyst at William Blair & Co., wrote in a note
this week. While some of that money could go toward more share
repurchases, some will also likely go toward acquisitions.
Splitting off Sikorsky “is the first step and then the
future is building scale on what they have and I think there are
opportunities to do that,” Sterne Agee’s Arment said.
Hayes has talked about targets in the $5 billion range.
That doesn’t sound huge for a company the size of United
Technologies, but a deal of that magnitude would rank as its
second-largest deal behind Goodrich. One area that United
Technologies could look to grow with acquisitions is the fire
and security business, Arment said.
European companies are “on sale” right now because of the
strong U.S. dollar so United Technologies may find opportunities
there, said Bahl & Gaynor’s Pettengill.
United Technologies has been stumped in its M&A efforts by
high equity prices, Hayes said Thursday at the company’s
investor meeting. The Standard & Poor’s 500 Index hit another
record earlier this month.
Even so, Hayes has frequently signaled an interest in
pursuing deals since he took over as CEO in November and the
Sikorsky split is a sign he’s not afraid of being aggressive.
“To me, if they found something, they would probably make
a move for it,” Levington of Bloomberg Intelligence said.

For Related News and Information:
United Technologies CEO Sets Tone With Plan for Sikorsky Spinoff
United Technologies Shakeup Sparks Deal Speculation: Real M&A
Real M&A’s 2015 Guide for Deal Watchers: Oil Mergers, GlenTinto
United Technologies Executive Departures Could Spark M&A
Bloomberg Intelligence, industrials: BI INDU <GO>
Top deal news: DTOP <GO>
Real M&A columns: NI REALMNA <GO>

--With assistance from Rachel Layne in Boston.

To contact the reporters on this story:
Brooke Sutherland in New York at +1-212-617-0448 or
bsutherland7@bloomberg.net;
Richard Clough in New York at +1-212-617-1030 or
rclough9@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net;
Edward Dufner at +1-214-954-9453 or
edufner@bloomberg.net
Elizabeth Wollman