Sikorsky Sale?

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pkcasimir

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It is being reported that UTC is considering the spin-off of Sikorsky. Seems strange.

Not strange at all. Once Louis Chenevert was forced out by the board late last year, Wall Street analysts were expecting this kind of move from the new CEO. United Technologies is one of the most profitable of American conglomerates but its stock price had stagnated compared to its main rivals. Sikorsky was the one division with the smallest operating margins; even smaller than Pratt & Whitney. The real profits are made in the building services part of the conglomerate.
Sikorsky would probably be better off being spun off or acquired by a big US defense corporation. And the new CEO and board could provide immediate returns to stockholders, either in a form of shares in the new company or a dividend boost from a sale to a major corporation.
In Wall Street terms, this makes perfect sense.
 
John Fedup

John Fedup

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pkcasimir said:
It is being reported that UTC is considering the spin-off of Sikorsky. Seems strange.

Not strange at all. Once Louis Chenevert was forced out by the board late last year, Wall Street analysts were expecting this kind of move from the new CEO. United Technologies is one of the most profitable of American conglomerates but its stock price had stagnated compared to its main rivals. Sikorsky was the one division with the smallest operating margins; even smaller than Pratt & Whitney. The real profits are made in the building services part of the conglomerate.
Sikorsky would probably be better off being spun off or acquired by a big US defense corporation. And the new CEO and board could provide immediate returns to stockholders, either in a form of shares in the new company or a dividend boost from a sale to a major corporation.
In Wall Street terms, this makes perfect sense.
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In Wall Street terms, yes, I suspect your are correct. Then again, what are acceptable margins? Perhaps they should dump P&W as well. I guess Otis can sell product at cost (or less) along with a long term maintenance agreement at astronomical prices....as long as some competitor does not come along with a more reliable cost effective alternative. I guess there could also be potential negatives down the road, e.g. CH148 Cyclone, VIP helio replacement, CH-53 upgrade which might be why Sikorsky has to go.
 
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pkcasimir

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In Wall Street terms, yes, I suspect your are correct. Then again, what are acceptable margins? Perhaps they should dump P&W as well.

Sikorsky is at 9.5%; P&W at 13%. Building systems is at 16%.

It wouldn't surprise me if that some time down the line UT spins off P&W. Obviously, they can't do both at the same time.

I think Sikorsky is much better off as a seperate company or part of one of the defense giants. Elevator people and aircraft guys don't mix too well.
 
John Fedup

John Fedup

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pkcasimir said:
In Wall Street terms, yes, I suspect your are correct. Then again, what are acceptable margins? Perhaps they should dump P&W as well.

Sikorsky is at 9.5%; P&W at 13%. Building systems is at 16%.

It wouldn't surprise me if that some time down the line UT spins off P&W. Obviously, they can't do both at the same time.

I think Sikorsky is much better off as a seperate company or part of one of the defense giants. Elevator people and aircraft guys don't mix too well.
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They both make stuff that goes up and down.:)
 
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pkcasimir

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[QUOTE=KiwiRob;292790]Yes they can.

ThyssenKrupp is coy about how much MULTI will cost but claims that the upfront expense will be offset by income generated from rentable space the system will free up. For towers over 300 meters tall, Bass says the system should pay for itself in under 10 years.

They sound like defense contractors.
 
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pkcasimir

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After receiving several offers, United Technologies' board of directors is scheduled to meet later this week to review the options for its $8B Sikorsky aircraft business.
UTC is considering two tax-efficient transactions for Sikorsky: a spin-off or combination with peer Textron .
Alternatively, Sikorsky may be sold outright to another company. Lockheed Martin, Boeing and Airbus have all expressed interest.
 
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John Fedup

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pkcasimir said:
After receiving several offers, United Technologies' board of directors is scheduled to meet later this week to review the options for its $8B Sikorsky aircraft business.
UTC is considering two tax-efficient transactions for Sikorsky: a spin-off or combination with peer Textron .
Alternatively, Sikorsky may be sold outright to another company. Lockheed Martin ), Boeing (and Airbus have all expressed interest
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Would a potential sale to Airbus sit well with the US Congress?
 
ngatimozart

ngatimozart

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John Fedup said:
Would a potential sale to Airbus sit well with the US Congress?
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Short answer No. Not sure of US law but wouldn't such a sale have to be approved by something like a foreign investment / ownership commission or agency?
 
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pkcasimir

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ngatimozart said:
Short answer No. Not sure of US law but wouldn't such a sale have to be approved by something like a foreign investment / ownership commission or agency?
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Although a sale of Sikorsky to Airbus is unlikely, it can be accomplished but the US Government would insist on strict conditions. A good example is BAE, a European (UK) company, that is a major weapons supplier to the US. It had to form a US subsidiary where the Board of Directors is American and responsible for the day to day running of the corporation. There is a special office within the Pentagon that handles these matters. Parenthetically, BAE now sells more to the Pentagon that it does to the MOD.
 
Trackmaster

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pkcasimir said:
Although a sale of Sikorsky to Airbus is unlikely, it can be accomplished but the US Government would insist on strict conditions. A good example is BAE, a European (UK) company, that is a major weapons supplier to the US. It had to form a US subsidiary where the Board of Directors is American and responsible for the day to day running of the corporation. There is a special office within the Pentagon that handles these matters. Parenthetically, BAE now sells more to the Pentagon that it does to the MOD.
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Very interesting that Airbus is being mentioned. Airbus Helicopters supplies the UH72 Lakota to the US Army and has production facilities in the US, so the entity has already jumped a number of big hurdles in Washington. As an observer from afar, it would appear to me unlikely that Airbus would swallow up Sikorsky, but even an expression of interest will certainly put some pieces in play on the chess board.
 
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pkcasimir

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Sikorsky is believed to be worth about $8 billion, but any sale involves a $3 billion tax bill, payable immediately but refunded after three years. To get around this, Sikorsky could be spun off as a separate company and then a potential buyer could acquire the company with no tax liability. (I don't write the US tax laws folks.) Textron (Bell Helicopters) seems the most logical buyer but it has a problem coming up with the financing . It would probably have to sell some assets and then also use debt financing.
Given the size of Lockheed Martin and Boeing, a $3 billion tax payment shouldn't be much of a problem.
 
John Fedup

John Fedup

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ngatimozart said:
Well it's official now. UTC are wanting Sikorsky sold by the end of the year. It will be interesting to see who the eventual buyer is.
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Yes, it will be. Boeing has a large footprint in rotary sales (Chinook, AH-64) which may raise concerns about competition should Boeing acquire Sikorsky. Bell would be a good too but some say they can't afford this acquisition. LM has enough on their plate with the JSF.
 
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pkcasimir

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The UTC CEO says that he already has three firm offers for Sikorsky and he expects more. And these bids have come in higher than expected. His thinking had been that a spin off made the most sense (it still does in my opinion) but that the offers UTC has received are so good that they have to be taken very seriously.
A spin off can be concluded by the end of the year. A sale would probably take a year. That's a factor to consider
 
John Fedup

John Fedup

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Given Boeing's collaboration with Sikorsky (SB>1 Defiant) for the JMRTD program, I guess Boeing will be fairly aggressive in trying to get Sikorsky if they can.
 
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pkcasimir

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Four bidders remain in active discussions with UTC about acquiring Sikorsky: Lockheed Martin, Airbus, Textron and the investment firm Blackstone, according to sources.
 
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