NEW YORK (Reuters) - United Technologies Corp (UTX.N), maker of jet engines, aircraft components and building systems, said it is open to doing a large acquisition despite rejecting a merger proposed by Honeywell International Inc HON.N.
“I wouldn’t be afraid to do a big deal,” Chief Executive Gregory Hayes said at an investor meeting on Thursday. But “it’s got to be something that’s actionable ... and the regulatory hurdles have to be manageable.”
Hayes said there was appetite in UTC’s commercial businesses, including elevators, fire and security systems, and possibly its aerospace systems business, to make a sizable acquisition.
UTC recently scotched an approach by Honeywell because the deal faced “very real” obstacles from regulators and customers, Hayes said.
Without an acquisition, the company is poised for “huge growth” based in part on urbanization and rising disposable incomes in the developing world, he said.
“We don’t need M&A for growth,” Hayes said, noting the company was not looking to increase debt for a short-term stock gain.
Asked if the company was concerned about pressure from activist investors following the Honeywell approach, Hayes pointed to two board appointments the company made in December: T. Rowe Price Group Inc Chairman Brian Rogers and Frederic Reynolds, former Chief Financial Officer of CBS.
“We brought these guys on because we needed the voice of the investor on the board,” Hayes said.
UTC forecast compounded annual revenue growth of 5 percent to 8 percent through the end of the decade. Its Pratt & Whitney aircraft engine division is poised for revenue growth in excess of 10 percent a year over that period.
The investment in aerospace systems and Pratt has positioned those units for “nearly a trillion dollars in future business over next 25 years,” Hayes said, referring to sales. Pratt engines, both those already in service and those already sold, will account for $750 billion of the total, he said.
The Otis elevator unit is aiming to boost growth, after recent years when efforts to widen profit margins cost it market share.
The company said it cut its forecast for heating, ventilation and air conditioning sales this year to low single-digit growth from mid single-digit growth, mainly due to slow sales in the Middle East.
“The work there has come to pretty much of a halt due to what’s going on in the oil industry,” said Bob McDonough, president of the Climate, Controls and Security business.
Reporting by Alwyn Scott; Editing by Meredith Mazzilli and Chris Reese