Honeywell and United Technologies Confirm Merger Talks

Updated from 6:06 p.m. EDT

Honeywell International(HON Quote) and United Technologies(UTX Quote) confirmed Thursday evening that they were discussing a possible merger that would create a diversified manufacturing giant.

The companies disclosed the talks after Honeywell's stock soared as much as 20% in after-hours trading in response to a report that United Technologies was close to reaching an agreement to buy the company for stock valued at more than $40 billion.

In a terse statement, the two companies said "they are in discussions regarding a possible business combination." But Honeywell and United Technologies said they would have no further comment at this time.

Shortly after the stock market closed, the financial cable channel CNBC, citing unidentified people close to the companies, reported that the boards of the two diversified manufacturers were expected to vote on a deal this weekend and that it could be announced this weekend.

A $40 billion bid would mean that United Technologies was offering slightly more than $50 a share for Honeywell, representing a 40% premium over Honeywell's stock price at the close of the regular trading session Thursday. But that price will probably change, since the deal is expected to be an all-stock transaction and reports of a possible deal sent Honeywell's stock surging and United Technologies' stock falling.

Shares of Honeywell climbed as high as $42.75 in after-hours trading following the CNBC report and were recently trading up $6.38, or 15%, at $41, according to Instinet. Honeywell's stock had ended the regular trading session up $1.94, or 5.8%, at $35.63, with much of that gain coming toward the end of regular trading.

Shares of United Technologies, however, fell $5.50, or 11%, to $60.50 in after-hours trading, according to Instinet. The stock had ended regular trading down 38 cents at $68.

CNBC reported that although the deal would be structured as an acquisition of Honeywell by United Technologies, it would have the characteristics of a merger of equals. Michael Bosignore, Honeywell's chairman and chief executive, would become chairman of the combined company, the cable channel said, while George David, United Technologies' chairman and chief executive, would become chief executive.

In December, Honeywell acquired AlliedSignal in a $16 billion deal.

United Technologies, based in Hartford, Conn., makes Otis Elevators, Pratt & Whitney aircraft engines Sikorsky helicopters and Carrier air conditioners.

Honeywell, based in Morris Township, N.J., makes such products as aircraft electronics, specialty chemicals and home security systems.