20170521w_biz_rockwell

United Technologies is planning to break itself into three independent companies now that it has sealed its acquisition of aviation electronics maker Rockwell Collins. Above, a crash-test dummy is seen strapped into an aircraft seating module on a crash sled, awaiting a test at a aviation electronics maker Rockwell Collins engineering development lab in Winston-Salem.

United Technologies Corp.’s $30 billion purchase of Rockwell Collins Inc. gained conditional U.S. Justice Department approval Monday.

The conditional approval represented one of the final two key steps toward the completion of a deal that was announced in September 2017. The other approval will come from the Chinese government.

“The process for closing on Rockwell Collins is moving forward, with the recent U.S. Department of Justice approval being the latest milestone,” United Technologies spokeswoman Michele Quintaglie told Bloomberg News. “Once we have received all of the necessary approvals, we will announce the final closing of this transaction.”

The UTC-Rockwell deal, which was announced Sept. 4, 2017, initially was projected for an early July closing.

The deal requires the approval of 17 international regulatory agencies. UTC is taking on $7 billion in Rockwell debt as part of the deal.

Rockwell has about 1,500 employees at its Winston-Salem operational hub that it acquired in April 2017 from B/E Aerospace Inc. It has confirmed plans to eliminate about 100 jobs as part of shifting certain production to facilities in the Philippines.

Some analysts have questioned whether the Chinese government has delayed its approval because of the expanding trade war with the Trump administration.

“I think what has typically happened here is the Chinese will not give us final approval until the (U.S.) Justice Department signs off,” Greg Hayes, UTC’s chairman and chief executive, said in September. “We’ve answered all the questions with the Chinese authorities.”

The companies must agree to sell off two Rockwell properties to resolve the department’s antitrust concerns: its pneumatic ice protection systems business; and its trimmable horizontal stabilizer actuators.

Pneumatic ice protection systems remove ice from the wing of an aircraft by means of an inflatable rubber de-icing boot. The trimmable horizonal stabilizer actuators ensure that an aircraft maintains altitude during flight by adjusting the angle of the horizontal tail surface.

Rockwell announced Sept. 18 it was selling the actuator business to Parisian manufacturer Safran SA. Justice must approve the buyer of each business. The Rockwell-Safran deal is projected to close in the first half of 2019.

The requirements were disclosed as part of a lawsuit filed Monday by the department’s Antitrust Division in federal court for the District of Columbia. The lawsuit was filed with the purpose of putting the deal on hold if the divestitures are not completed.

The department said in a statement “that without the divestitures, the proposed acquisition would lessen competition substantially in the market for ice protection systems, by combining two of the world’s three suppliers of pneumatic ice protection systems, and in the market for (the actuators), by combining two of the world’s leading producers of (the actuators).”

“Today’s remedy ensures that customers continue to benefit from competition in the supply of these two aircraft components that are critical to safety,” said Makan Delrahim, an assistant attorney general for the antitrust division. “The remedy allows the divestiture buyers to compete vigorously to provide high-quality systems and service to customers.”

At the conclusion of a 60-day public comment period, the federal court “may enter the final judgment upon finding it is in the public interest.”

The deal has drawn mixed reactions from analysts and investors, including several who say UTC is overpaying for Rockwell.

Bloomberg News reported on March 19 that Hayes said he plans to retire upon the full integration of Rockwell, which is projected to take three to five years.

Rockwell, based in Cedar Rapids, Iowa, and UTC Aerospace Systems, based in Charlotte, would be integrated to create Collins Aerospace Systems. Rockwell’s top executive, Kelly Ortberg, will serve as Collins Aerospace’s chief executive.

On Feb. 23, the companies said Collins Aerospace would keep its aircraft-interiors operations in Winston-Salem.

Collins Aerospace would have a small executive leadership office in Palm Beach County, Fla., at an existing UTC site.

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rcraver@wsjournal.com 336-727-7376 @rcraverWSJ

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