Event Driven Takeaways
- A person briefed on the matter confirmed that the DOJ is expected to finish vetting rival Safran to purchase divestitures for approval of United Technologies’ bid for Rockwell Collins by either the end of this month or early in October, aligning with statements made at a conference last week by Greg Hayes, chief executive of United Technologies.
- A Safran spokesperson told Event Driven that the company had agreed to purchase several Rockwell assets but not United’s research projects in oxygen systems, which the companies had previously agreed to sell for CADE and EC approval.
- The person briefed on the matter, as well as Hayes, confirmed that the DOJ’s required sell-offs were the same as those required by CADE and the European Commission.
A person briefed on the matter confirmed that the DOJ expects to finish vetting rival Safran to purchase divestitures for approval of United Technologies’ bid for Rockwell Collins by either the end of this month or early in October, aligning with statements made last week by Greg Hayes, chief executive of United Technologies.
Speaking at Morgan Stanley’s 6th Annual Laguna
Conference in Dana Point, Calif., on Sept. 14, Hayes told investors that the companies “expect to close” their deal before the end of this month. Although Hayes said he thinks the companies have “answered all the questions from the regulatory agencies,” he conceded that there was “still a little work to do.”
According to the person briefed on the matter, the DOJ is expected to approve the companies’ proposed buyer of divestitures within two to three weeks. “All that’s left is the vetting of the divestiture buyer,” said this person. “That’s expected to happen by the end of the month, but may slip into early October.”
Hayes has so far provided multiple updates to the companies’ expected timeline for the deal’s close, previously telling investors in May that the merging parties expected to close in June or July. He addressed this delay at the Laguna conference, saying that the companies "had a problem" with one of the proposed divestitures. “[I]t’s just [taken] us longer to find a buyer for one of the businesses that Rockwell has,” Hayes said, noting that the companies ultimately presented rival Safran to buy these assets.
The person briefed on the matter confirmed that the DOJ’s requirements were the same as those of
CADE and the
European Commission, sell-offs which Hayes called “tiny” during the Laguna conference. “I think in terms of the divestitures, we knew there were three businesses where there was some level of overlap that we had to dispose of,” Hayes said. “Again, these are tiny businesses in the scale of - or the scope of - what is the combined Collins Aerospace, which is about $26 billion.”
Safran confirmed in its
press release for first-half 2018 financial results that it had agreed to purchase Rockwell’s “Actuators, Pilot controls and Special products business,” further stating that the company expected to complete the purchase in the first half of 2019. A Safran spokesperson told Event Driven that the company had agreed to purchase several Rockwell assets but not United’s research projects in oxygen systems, which the companies had previously agreed to sell for CADE and EC approval.
As Event Driven
previously reported, the DOJ began vetting a divestiture buyer proposed by United and Rockwell in mid-July, with expectations to complete its vetting process after approximately two months. Several antitrust practitioners with knowledge of the DOJ’s vetting process agreed that this timeline makes sense.
Several antitrust practitioners, who recently spoke with Event Driven, outlined the activity that has likely taken place at the agency during its vetting, as well as the last steps that may remain before the DOJ formally approves the deal.
According to the practitioners, an initial meeting will take place between agency staff and attorneys for the merging parties and the buyer to present the buyer’s business plans. The agency will then meet alone with the buyer’s attorneys and executives to discuss the bidder’s ability to run the business. Sometimes the buyer will seek assets beyond those originally agreed-upon, said one practitioner, noting that the DOJ and FTC will often agree to these additional assets to avoid the risk of divestiture failure.
After this second meeting with the divestiture buyer, the DOJ’s case team will then call customers and other market participants to gauge their thoughts about the buyer. “They’ll call customers and ask them hypothetical questions about the buyers,” the second practitioner said. “They’ll talk to whoever it is that the government talked to before, procurement officers or the CEO if it’s a small company.” The agency will then make its decision regarding the buyer.
United CEO Hayes said at the Laguna conference that this sort of activity was at the root of the delay in approval. “I think the issue has always been how long does it take once you divest, to actually transition to the new owner, and that’s what’s taken us so long with the DOJ here, is actually trying to make sure that these businesses as we stand them up and as we sell them, are viable,” said Hayes. “But I think there has been no surprise there at all.”
The transaction still requires regulatory approval in China. Hayes said that the companies had answered all of the regulator’s questions, but that “they have not given us any indication if there is any issue other than DOJ final approval.”
Event Driven’s past coverage of this transaction can be found
HERE.
--Matt Tracy