By Ray Jaworowski, Senior Aerospace Analyst, Forecast International.
On the opening day of the Paris Air Show, United Technologies Corp (UTC) revealed that it has decided to proceed with a sale or spinoff of its Stratford, Connecticut-based Sikorsky Aircraft subsidiary. Earlier this year, UTC had announced that it was reviewing strategic alternatives regarding Sikorsky’s future within the UTC corporate portfolio.
At the time, Forecast International wrote that Sikorsky had a bright future with or without UTC. We pointed to such factors as Sikorsky’s continuing leadership in the military rotorcraft market among Western manufacturers, underscored by robust U.S. Army procurement of Black Hawk helicopters as well as key wins in such contests as the U.S. Air Force combat rescue helicopter and U.S. Navy VXX presidential helicopter programs. Added to this are Sikorsky’s smaller but growing presence in the civil rotorcraft market and the bright outlook for the firm in the increasingly important helicopter aftermarket.
Recent events indicate that Forecast International is not alone in its assessment of Sikorsky’s future outlook. Press reports have quoted UTC management as indicating that the company has already received as many as three bids for Sikorsky, and that additional bids may be in the offing. UTC had previously been leaning toward spinning off Sikorsky into an independent, standalone company, due to the tax implications of an outright sale of the helicopter manufacturer to another firm. However, the offers received so far have been characterized by UTC management as being sufficiently lucrative so as to make a sale of Sikorsky justifiable despite the tax consequences.
The identities of the actual and/or potential bidders have not been officially revealed. Industry speculation in recent weeks, though, has focused on such companies as fellow rotorcraft manufacturers Airbus Helicopters, Bell, and Boeing. The Sikorsky product line would be a good fit with the product lines of any of these three companies, and perhaps particularly so with Bell’s product line. Merging the Bell and Sikorsky line-ups would result in relatively little competitive overlap, a notion that likely has not escaped the attention of Bell parent firm Textron.
An acquisition of Sikorsky by Boeing would result in a military rotorcraft juggernaut, and also provide Boeing with an entree into the civil side of the helicopter industry, a segment where it does not currently compete. A merger of Sikorsky with Airbus Helicopters would result in a dominant company in both the military and civil sides of the market, but such a deal might raise concerns within the U.S. government about non-U.S. ownership.
Another company rumored to be interested in acquiring Sikorsky is Lockheed Martin. Though it does not manufacture helicopters, Lockheed Martin is heavily involved in the rotorcraft industry, often as a systems integration specialist. Lockheed Martin has been known in the past to have considered becoming involved in helicopter manufacture.
Now that it has decided that it will proceed, UTC says that a decision on how to proceed with the Sikorsky divestiture will be made by the end of September 2015. It should be noted that all this is taking place against the backdrop of a ferocious debate in UTC’s home state of Connecticut regarding the business environment within that state. This debate intensified with the recent passage in the Connecticut legislature of a new round of increases in business and personal taxes, which has resulted in companies such as GE seriously considering relocating from Connecticut.
As always, Forecast International is at the Paris Air Show. Visit us at Hall 3, Stand C146, and see what our market intelligence services can do for you.
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