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May 15, 2018

Bill Ackman pitches breaking United Technologies into 3 parts

Bill Ackman CEO of Pershing Square Capital

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Activist investor Bill Ackman said United Technologies Corp. (UTX.N) is trading at a hefty discount and the businesses under its umbrella would thrive as three standalone companies.

“This is one of the last remaining conglomerates,” Ackman said on a conference call Tuesday. “Other than Berkshire Hathaway, conglomerates have not had a great track record.”

Ackman didn’t disclose the size of Pershing Square Capital Management’s stake in United Technologies. Echoing the arguments this month by shareholder activist Third Point, Ackman said he believes separating the company’s aerospace, elevators and climate control businesses makes sense because they collectively trade at a discount to their peers in each segment.

“The management here has put together three outstanding businesses and built them to significant scale,” Ackman said. “We think each business would trade at a very attractive valuation, and more importantly operate more effectively as independent companies.”

A United Technologies representative didn’t have an immediate comment.

United Technologies fell 0.9 per cent to US$123.80 at 12:24 p.m. ET. The shares fell 2 pe rcent this year through Monday, trailing the 2.1 per cent gain in the S&P 500 Index.

Ackman said he was also building a new position in another company, which he didn’t identify.

United Technologies also faces a shareholder activist campaign by Dan Loeb’s Third Point. In a letter to investors this month, Third Point said having such disparate businesses under one corporate roof has led to “poor management execution” and and a lagging share price.

Unlocking Value

Third Point said the Farmington, Connecticut-based company could unlock more than US$20 billion in shareholder value by splitting its operations into three businesses.

The pressure from the activist investors raises the stakes for United Technologies, which is already weighing dramatic changes.

Chief Executive Officer Greg Hayes has said the board will consider options -- including a potential breakup -- after the expected closing this year of its US$23 billion acquisition of Rockwell Collins Inc., one of the biggest aerospace deals in history. He surprised investors in February when he said a three-way break up might help boost shareholder value.

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