United Technologies Corp is lining up financing in the double-digit billions of dollars to support a major acquisition in the United States, according to people with direct knowledge of the matter.
The U.S. industrial conglomerate is tapping the credit market for funds that could top $20 billion, said one of the sources.
The sources declined to say which company United Tech is planning to buy, but investors pushed up shares of industrial and aerospace companies, betting they could be targets for United Tech or could be bought by other companies if United Tech spurs more industry consolidation.
Among the biggest gainers were Cessna aircraft maker Textron Inc, whose shares jumped 9 percent to give it a market value of $5 billion. Shares of aerospace supplier Rockwell Collins Inc rose 10 percent to give it a market value of nearly $9 billion, and Goodrich Corp rose 5 percent to a market value of more $11 billion.
United Tech spokesman John Moran declined to comment. Shares of the company were down 0.9 percent to $74.92 on Friday, valuing the firm at a little below $67 billion. It had $5.4 billion in cash as of June 30.
Terms of the offer are still being worked out and any potential bid could still fall apart, said the people with direct knowledge of the situation. They asked not to be identified as the plans are confidential.
United Tech Chief Executive Louis Chenevert has repeatedly said the company is interested in doing more deals. But he and Chief Financial Officer Greg Hayes have complained that they have found "substantial disconnect" between what they are willing to pay and what potential sellers expect.
"You're going to see us put our balance sheet to work, you're going to see us put more cash to work on the M&A side. And that's where I think a big piece of growth is going to come from in the next few years; it's going to come from the M&A," Hayes told investors in July.
United Tech officials have expressed interest particularly in companies to merge into its Fire and Security and Hamilton Sundstrand security and aircraft components divisions. Both divisions are below Chenevert's $10 billion annual revenue target.
As of July, the company had done just $184 million in acquisitions this year, off its targeted pace of $1.5 billion in deals for 2011.
Chenevert, who came up through the company's aerospace business and headed Pratt & Whitney before taking the top job at corporate, holds up his $1.8 billion acquisition of General Electric Co's security business as the sort of deal he would like to replicate in the near future.
In 2008 United Tech made a hostile $2.64 billion takeover offer for Diebold Inc, a maker of automated teller machines. That effort was ultimately fruitless, and Chenevert has since said he would be reluctant to go hostile again after that experience.
United Tech's last mega deal was an attempt to buy Honeywell about a decade ago. It was outmaneuvered by GE, whose bid was then turned down by European competition regulators.
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