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Feb 28, 2018

United Technologies shares rise on report that Ackman is building stake

FILE PHOTO:  Ackman, chief executive officer and portfolio manager at Pershing Square Capital Management, speaks in Las Vegas

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Billionaire investor Bill Ackman has a new company in his sights.

Pershing Square Capital Management, the activist firm run by Ackman, is building a position in industrial manufacturer United Technologies Corp., according to a person familiar with the matter. The size of the stake, as well as what sort of changes Ackman may seek, is unclear at this time.

Representatives for Pershing Square and United Technologies declined to comment.

The presence of an activist could accelerate plans revealed last week to explore a possible breakup of the maker of jet engines and elevators. Greg Hayes, chief executive officer of United Technologies, said the board will determine by the end of the year whether the company would be more valuable as three standalone businesses.

United Technologies is the latest industrial manufacturer to explore such a move after General Electric Co., which has a representative of Trian Fund Management on its board, said it may break out its primary businesses into publicly traded companies.

United Technologies rose as much as 3.4 per cent in New York Wednesday. The shares had gained 5 per cent this year through Tuesday, topping the 2.6 per cent gain in the Standard & Poor’s 500 Index. Pershing’s position was first reported by CNBC.

Breakup Plan

The plan under consideration at United Technologies would create a focused aerospace business with about US$45 billion to US$50 billion in sales, Hayes said last week at an investor conference. A separate Otis elevators operation would have about US$12 billion to US$13 billion in revenue, and the climate-control division, which makes Carrier air conditioners, would have US$17 billion to US$18 billion.

A possible breakup wouldn’t come until after United Technologies wraps its blockbuster acquisition of Rockwell Collins Inc., Hayes said, while noting that such a move may involve “significant dis-synergies.” The deal, set to close later this year, will reshape the company’s aerospace operations while the Pratt & Whitney unit boosts production on a critical new jet engine.

United Technologies has been speculated as a possible activist target. Barclays analyst Julian Mitchell said in a Feb. 14 note that the Farmington, Connecticut-based company was one of the likeliest candidates, along with Eaton Corp. and Johnson Controls International Plc.

Hayes has downplayed the talk, saying instead that he thinks of himself as the activist in the stock because he’s contemplating sweeping changes to boost shareholder value.