Billionaire investor Daniel Loeb`s Third Point on Friday urged United Technologies to move more forcefully in pursuing a breakup into three businesses, saying such a step could unlock $20 billion in value.
The New York-based hedge fund owns a $1-billion stake in the Connecticut conglomerate and signaled to its clients that it will step up pressure on the board and management to follow through on their promises to review the company`s future.
Loeb wants the company to split into three businesses: the Climate, Controls & Security division, Otis elevators, and an aerospace company (“Aerospace RemainCo”) encompassing UTAS and Pratt & Whitney. It also would include Rockwell Collins Inc, which UTC is acquiring.
"A three-way split would unlock in excess of $20
billion of value, net of separation costs," Third Point said in its letter to clients seen by Reuters on Friday.
"Third Point did not invest in UTC for what it is today but for what it could become," the letter said, adding that the fund plans to work constructively with the company.
United Tech shares were up 1.5 percent at $119.50.
UTC, based in Farmington, Connecticut, said it always welcomes input from shareholders but disagrees with some of the hedge fund`s points, possibly exposing areas of conflict between the two sides.
Loeb said management may be dragging its heels.
"UTC`s management has acknowledged the disconnect between the company’s intrinsic value and share price but it seems less open to a three-way split solution than shareholders might
expect," the letter said.
In March, UTC Chief Executive Greg Hayes put a price tag of as much as $3 billion on splitting the company apart. He also said it could take two years to complete.
But Loeb on Friday said it could be done for less, putting the figure for refinancing debt that matures between 2020 and 2027 at around $200 million.
Loeb has a history of sparring with chief executives including at Dow Chemical, Sotheby`s and Yahoo, and his firm`s involvement at United Technologies comes at a time when conglomerates are fighting to justify their existence.
People familiar with UTC`s thinking say executives currently need to concentrate on closing its $30-billion acquisition of Rockwell Collins, which it agreed last year, saying that focusing on a breakup now could be a distraction.
Loeb is not the only activist investor in UTC`s stock. Earlier this year, William Ackman said that his Pershing Square Capital Management was also invested. So far, Ackman, an often voluble investor, has said nothing about the company.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)