GE Reportedly Offers to Acquire Honeywell

General Electric Co. proposed acquiring Honeywell International Inc. on Friday just as Honeywell’s board of directors was considering a $36-billion takeover offer from United Technologies Corp., people familiar with the matter said.

The last-minute GE proposal torpedoed the talks between United Technologies and Honeywell. United Technologies said Friday it had ended its merger talks with Honeywell and Honeywell later said it was considering alternative proposals.

Fairfield, Conn.-based GE declined to comment.

Honeywell, based in Morris Township, N.J., is a leading maker of avionics, or aircraft electronics, as well as turbochargers, specialty chemicals and automated control systems.

United Technologies, based in Hartford, Conn., makes Otis Elevators, Pratt & Whitney aircraft engines, Sikorsky helicopters and Carrier air conditioners.

GE, also a leading manufacturer of aircraft engines, would gain an even stronger presence in the sector with the acquisition of Honeywell, but could be forced to make some divestitures to relieve antitrust concerns, sources said.

Sources said GE Chairman Jack Welch apparently called Honeywell’s board Friday morning to discuss a bid that would top the offer from United Technologies.

“When you get a call from Jack Welch and he says ‘Don’t do anything because I’m prepared to meet you and top the bid,’ you don’t have to wonder if he’s serious,” one source said.

“No one is going to say ‘You’re not serious, you can’t do it,’ ” he said. And, he noted, the Honeywell board would have a fiduciary duty to its shareholders to consider the offer.

Other rumored suitors include German engineering and technology group Siemens and acquisitive diversified manufacturer Tyco International Inc.

Siemens had been reportedly preparing a bid for all or part of Honeywell’s industrial control and automation business in a deal worth up to $1.5 billion, according to a report in Britain’s Sunday Telegraph this week.

A Siemens spokesman declined to comment on the report but said Siemens Chief Executive Heinrich von Pierer “has said for some time that he wants to make further acquisitions in process automation.”

But market sources in New York dismissed Siemens as a likely bidder for all of Honeywell because of doubts about its ability to finance such a large transaction.

Tyco, meanwhile, declined to comment.

Phua Young, an analyst at Merrill Lynch who follows Tyco closely, said he did not believeTyco was among the suitors.

“In a sense this would be a sort of hostile kind of move,” Young said. Tyco, he said, tends to be a value buyer, shying away from situations that could turn into bidding wars.

Shares of GE fell $3.38, or more than 6%, to close at $52.25 on the New York Stock Exchange on Friday. Shares of Tyco rose $2.88 to close at $50.50 after earlier moving lower on rumors that it was interested in Honeywell.

Honeywell rose $10.12, or nearly 29%, to close at $46 on the NYSE.

Shares of United Technologies fell $3 to close at $65 after trading as low as $59.88 earlier in the day before the news that its talks with Honeywell had ended.

The surprise development came just one day after United Technologies and Honeywell confirmed they were in merger talks for a deal that would have been worth about $36 billion in stock.

United Technologies had offered 0.74 of a share of its stock for each of Honeywell’s 801 million shares outstanding, according to people familiar with the situation.

CNBC, an affiliate of General Electric, first reported the talks between United Technologies and Honeywell Thursday and then broke the news to Welch, who was on the floor of the New York Stock Exchange at the close of trading.

When told of the merger talks between United Technologies and Honeywell, Welch expressed surprise and told CNBC he would have to think it over.

Welch, who will turn 65 on Nov. 19 and is scheduled to retire next April, apparently didn’t have to think about it for long. He is a close friend of Honeywell’s former chairman Lawrence Bossidy. Bossidy, a former top executive at GE, was chairman and chief executive of Allied Signal when the company agreed in 1999 to acquire Honeywell.

The combined company retained the name Honeywell and he stayed on as chairman until April 2000.