United Technologies Corp. will break itself up, capping months of pressure on Chief Executive Greg Hayes to separate the conglomerate’s aerospace operations from its elevators and climate-controls divisions.
The company, buoyed by the just-completed $23-billion purchase of Rockwell Collins Inc., will retain its aerospace business and operate with two divisions: Pratt & Whitney jet engines and Collins Aerospace Systems. Otis Elevator Co. and Carrier, a provider of air conditioners and heating systems, will be spun off as independent companies, United Technologies said in a statement Monday.
The three-way split caps a dramatic overhaul of United Technologies under Hayes, who negotiated the blockbuster Rockwell Collins acquisition last year and closed the deal this week. Two activist investors, Bill Ackman of Pershing Square Capital Management and Dan Loeb of Third Point, took stakes in United Technologies and pushed for a breakup. Loeb said a three-way split would unlock $20 billion in shareholder value.
“Our decision to separate United Technologies is a pivotal moment in our history and will best position each independent company to drive sustained growth, lead its industry in innovation and customer focus, and maximize value creation,” Hayes said in the statement.
Hayes will continue as chairman and CEO of United Technologies following the tax-free separations of Otis and Carrier, which are expected to be completed in 2020.
United Technologies climbed 2.1% to $130.65 in late trading in New York. The shares were little changed this year through the close on Monday, leaving its market value at about $100 billion.
In pursuing a split, United Technologies will follow DowDuPont Inc., General Electric Co. and Honeywell International Inc. in busting up a diverse array of holdings.
Honeywell has spun off two low-growth businesses this year. DowDupont Inc., created in a merger of two chemical giants, will split into three companies next year. GE is aggressively selling assets to tighten its focus amid a steep stock decline.
At United Technologies, the world’s largest aerospace supplier, Collins Aerospace and Pratt & Whitney would have had sales of $39 billion last year on a pro forma basis, according to the statement. Otis, which has more than 2 million elevators in use, had $12.3 billion in sales last year. Carrier had $17.8 billion.