June 15, 2015 / 6:50 AM / 5 years ago

UPDATE 3-United Tech to exit Sikorsky helicopter business

(Updates with comments from Sikorsky president, share price)

By Andrea Shalal

PARIS, June 15 (Reuters) - United Technologies Corp said on Monday it was exiting the helicopter business and would decide by the end of the third quarter whether to spin off or sell its $8 billion Sikorsky Aircraft unit, the U.S. military’s largest helicopter maker.

United Technologies said the decision to shed the 90-plus year-old Sikorsky unit, which generates lower margins than other United Tech units, came after a review of strategic alternatives announced earlier this year and was subject to final board approval. United Tech shares were trading 2.5 percent lower at $114.60 around mid-afternoon on the New York Stock Exchange.

United Tech Chief Executive Gregory Hayes said Sikorsky was well positioned for long-term growth and separating it from the portfolio would allow both Sikorsky and the parent company to better focus on their core businesses.

“Whether we sell it or whether we spin it, the future will be bright for Sikorsky,” Hayes said.

The board met last week to discuss its options after receiving a number of offers for Sikorsky, including one that would combine the company with the Bell Helicopter unit of Textron Inc, Reuters reported last week.

Lockheed Martin Corp and Boeing Co have also expressed interest in a potential deal.

Bob Leduc, president of Sikorsky Aircraft, told Reuters in his first media interview that he remained confident about the company’s longer-term outlook, despite a sharp downturn in the commercial market and the pending sell or spin decision.

Leduc, a long-time United Tech executive, said he could not refuse Hayes’ request that he return from retirement to head Sikorsky. “From my perspective, Sikorsky is a national treasure. That opportunity doesn’t come along very often,” he said.

Any successful bidder would likely have to pay a premium given the steep tax bill facing the parent company, Leduc said.

He said the current downturn in the commercial market was expected to last 18 to 24 months, with dropping oil prices driving demand from the oil and gas sector sharply lower.

Earlier, Leduc told an investor conference the company expected to boost revenues to at least $10 billion by 2025 based on its backlog of $49 billion, largely in U.S. military orders, which account for about 70 percent of the company’s business.

Leduc said there was “upside” on top of that revenue forecast, depending on developments in new helicopter programs.

“We will be the last man standing,” Leduc told Reuters. He said the company would be strengthened by a recent restructuring and efforts to improve the company’s risk management and discipline on new development programs, regardless of whether it was eventually sold or spun off as a standalone company.

The company’s development of autonomous flight control systems could help it reduce the weight of helicopters in coming years, lowering costs, and should help boost sales, Leduc said. He said new systems that allow better monitoring of aircraft components could also give the company an edge, he said.

Excluding Sikorsky, United Technologies said it now expects 2015 earnings per share of $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 percent.

The company lowered its forecast for earnings per share including Sikorsky to $6.55 to $6.85, down from the previous expectation of $6.85 to $7.05.

It said the change reflected about $0.10 to $0.20 of one-time separation costs along with a $0.10 decline in Sikorsky’s revised expectations for the year.

Sikorsky announced earlier this month that it would cut 1,400 jobs and consolidate facilities.

Leduc said the company was reducing its facilities footprint by 1 million square feet, or about a third, to adjust for lower revenues in the near term. (Reporting by Andrea Shalal; Editing by Mark Potter and David Evans)

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