NEW YORK (The Deal) -- A combination of tax, regulatory and even labor issues figure to complicate any potential bid for United Technologies' (UTX) Sikorsky unit, meaning a spinoff remains the more likely option for the helicopter manufacturer.
Hartford, Conn.-based United Technologies said in March it was exploring options for Sikorsky as part of a broader push to revamp its portfolio. From the start, an outright sale appeared unlikely because of the enormous tax bill that would accompany a sale of Sikorsky, which has been part of United Technologies since the 1920s.
Reports surfaced late Tuesday that a number of suitors including Boeing (BA), Airbus, Textron (TXT) and Lockheed Martin (LMT) were exploring bids for Sikorsky. The suitors could seek to get around the tax issues by participating in a spinout via a Reverse Morris Trust, where Sikorsky could be shed tax-free if UTX holders ended up with a majority stake in the new entity.
United Technologies would have to determine that such a deal provides enough extra value vs. a straight split to justify the added complexity and regulatory scrutiny, not to mention the added time needed to deal with those issues. UTX has said it hopes to complete its evaluation by midyear.
All the potential suitors are too large to merge with Sikorsky -- which is valued at about $8 billion -- and keep UTX holders with majority control, though Textron is small enough that it could orchestrate a separate spinoff of some of its industrial and transportation assets and then combine its aerospace business with the helicopter maker.