United Technologies Corp (UTX) said Monday it’s spinning off its Sikorsky Aircraft business and will decide by the end of the third quarter whether to spin off or sell the $8 billion unit.
It’s the end of an 86-year relationship for the U.S.’s largest maker of military helicopters, whose products have included the Black Hawk and the Super Stallion, and a likely prelude to consolidation among the big defense contractors.
Lockheed Martin Corp (LMT) and Boeing Co (BA), two of UTC’s biggest competitors, have expressed interest in a potential deal that would consolidate the sector.
A likelier option may be a combination with the Bell Helicopter unit of Textron Inc (TXT), which was discussed by UTC’s board last week, according to Reuters.
But it’s weakness in demand from another key customer, the oil and gas sector, which has triggered United Technologies’ decision. Energy companies have slashed spending in the wake of the collapse in oil prices at the end of last year.
United Technologies said the decision came after a review of strategic alternatives announced earlier this year and was subject to final board approval.
Chief Executive Gregory Hayes said in a statement that separating Sikorsky from the portfolio would allow both United Technologies and Sikorsky to focus better on their core businesses.
The announcement came after United Technologies lowered its forecast for profits at Sikorsky. However, it re-affirmed its forecast for the rest of the group at $6.35 to $6.55 on sales of approximately $58 billion to $59 billion. The company said it continued to expect organic sales growth of 3% to 5%.
Sikorsky announced earlier this month that it would cut 1,400 jobs and consolidate facilities.
