United Tech says combination with Honeywell not feasible

The diversified technology and manufacturing company and United Technologies, an aerospace company, have held discussions about a merger during the last two weeks, sources told CNBC.

United Technologies Board of Directors and management team continue to believe that UTC’s world-class, global franchises have generated and will continue to generate significant cash flow through economic cycles, and its business segments are extremely well positioned to create long-term shareholder value.

But late Monday, United Tech acknowledged that “preliminary, exploratory conversations” had been held.

A merger proposal from Honeywell followed last fall, but it was rejected by United Technologies’ board because of concerns the deal wouldn’t win regulatory approval, one of the people said.

In particular, it said that combining two of the world’s largest players in the aerospace and commercial building industries would face “insurmountable” opposition from government regulators.

The new refers to the latest talk between the two giants. United Technologies is concerned that a merger attempt may not pass a regulatory review, according to the report.

United Technologies stock is surging by 6.19% to $93.69 in mid-afternoon trading on Monday. UTX’s Pratt & Whitney makes aircraft engines; moreover, both companies provide numerous avionics and other systems that allow the airplanes to function better.

But as Honeywell’s stock outperformed UTX and its market value grew to be roughly $10 billion more than UTX, it was emboldened to try again.

Both companies have been under pressure by Boeing and Airbus to reduce their costs, and both have also seen defense orders squeezed in recent years. But GE jumped in with a higher offer, striking a $40 billion deal to acquire Honeywell. Mr. Hayes has promised to spend $16 billion on share buybacks and outlined a three-year cost-cutting program to boost profits.