NEW YORK United Technologies Corp (UTX.N) has agreed to sell industrial businesses of its Hamilton Sundstrand subsidiary to Carlyle Group LP (CG.O) and BC Partners Ltd for $3.46 billion, the companies said on Wednesday, a deal that will help fund United Tech's largest-ever acquisition.
The transaction, which is expected to close in the fourth quarter, underscores private equity's appetite for assets being carved out of industrial conglomerates and the still-robust financing markets for leveraged buyouts in the United States.
Diversified U.S. manufacturer United Tech put three units, including the Hamilton Sundstrand industrial businesses, on the auction block in an effort to fund its $16.5 billion takeover of aircraft components maker Goodrich Corp GR.N.
Reuters reported on Monday that two buyout firms had teamed up and were in advance discussions to buy the pump and compressor businesses within Hamilton Sundstrand for about $3.5 billion.
Hamilton Sundstrand makes fluid control products and pumps under the Milton Roy and Sundyne brands. It also manufacturers air compressors under the Sullair brand.
Although Carlyle and BC Partners bid for the entire unit, several industrial companies such as SPX Corp (SPW.N), Flowserve Corp (FLS.N), Dover Corp (DOV.N), Atlas Copco AB (ATCOa.ST), and Gardner Denver GDI.N, as well as private equity firm TPG Capital LP, looked at buying separate parts of the business.
United Tech decided on a quicker and less risky sale by keeping the business together.
Carlyle and BC Partners were attracted to the scale and low capital expenditure requirements of the combined business and see opportunities to invest in areas such as flow control, rather than in operational improvement.
"Teaming up with Carlyle gives us more firepower on a combined basis to invest in the business, both organically and potentially through acquisitions, as appropriate," Mark Fariborz, a partner at BC Partners, told Reuters.
On Monday, United Tech also reached a $550 million deal to sell its Rocketdyne space unit to GenCorp Inc GY.N, a maker of aerospace propulsion systems.
When United Tech unveiled plans to buy Goodrich last year, it said it planned to issue $4.6 billion in new shares to finance the deal. But shareholders opposed that and the Hartford, Connecticut-based conglomerate has put assets on the auction block to help pay for the deal.
Citigroup (C.N) and RBC Capital Markets advised BC Partners and Carlyle on the deal, which is subject to regulatory approval and customary closing conditions. Citigroup, Credit Suisse (CSGN.VX), Deutsche Bank (DBKGn.DE), Morgan Stanley (MS.N), RBC Capital Markets and UBS UBSN.VX are providing debt financing.
(Reporting by Soyoung Kim and Greg Roumeliotis in New York; Editing by Leslie Adler and Richard Pullin)