(Bloomberg) — United Technologies Corp. plans to unload Sikorsky Aircraft, the 90-year-old maker of the iconic Black Hawk military helicopter and the rotorcraft that carry U.S. presidents.
The unit, which had $7.5 billion in sales last year, will be spun off if United Technologies can’t find a buyer, Chief Executive Officer Gregory Hayes said Wednesday. He said the decision followed a portfolio review that began after his appointment to the top post in November.
“As we looked at the business around Sikorsky, we became convinced internally that while Sikorsky is a great helicopter company, it probably didn’t fit in the UTC portfolio,” Hayes said in a conference call with reporters.
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Cutting ties with Sikorsky will help Hayes put his stamp on United Technologies, a company with $65.1 billion in 2014 revenue and a product lineup that includes jet engines, elevators and air conditioners. Hayes, who was chief financial officer since 2008, took the helm of Hartford, Connecticut-based United Technologies after the abrupt resignation of Louis Chenevert.
Sikorsky, which generates about two-thirds of its sales from U.S. defense contracts, is the only disposition under study “right now,” Hayes said. United Technologies said it’s conducting a strategic review of the helicopter business to consider options and expects the assessment to be finished this year. JPMorgan Chase & Co. is advising, Hayes said.
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Hayes is scheduled to provide more details of the company’s strategy at an investor meeting Thursday in New York.
Founded in 1925 by inventor Igor Sikorsky, the unit has supplied Black Hawks to more than two dozen governments around the world. Sikorsky also won a contract last year to build as many as 21 VIP helicopters for the U.S. president and other officials from the executive branch.
Analysts have been speculating since the CEO change about the possible divestiture of Sikorsky, a point reinforced when Hayes told analysts in December that he had no plans to sell the unit while saying “anything’s for sale at the right price.”
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He drew a distinction Wednesday between helicopter manufacturing and United Technologies’ other operations, which make systems for aircraft and buildings. Sikorsky has a fundamentally different business model, as well as lower growth and margin potential, Hayes said.
Hayes also reiterated the interest he expressed in December in making acquisitions, while saying any potential purchases must meet several criteria on returns and strategy.
“We’re having a hard time finding bigger deals that meet all those criteria because of valuations,” he said. The company also will use its cash to buy back $3 billion of stock this year, he said. Separately, he said United Technologies will move its headquarters to nearby Farmington, Connecticut, by August.
United Technologies rose 0.8 percent Wednesday to $118.34 at the close in New York. The shares have gained 2.9 percent this year while the Standard & Poor’s 500 Industrials Index has fallen 1.6 percent.
Sikorsky was the company’s smallest unit based on 2014 revenue. It has about 15,300 employees, according to United Technologies’ website.
The division traces its roots to Igor Sikorsky, who began experimenting with vertical-lift aircraft in Russia more than a century ago. He later shifted to focus on conventional airplanes, and left the country in 1919.
In the U.S., he founded the company that became known as Sikorsky Aviation Corp. and built fixed-wing aircraft, including some of the best-known seaplanes of the prewar era. In 1939, his VS-300 — “the world’s first practical single main rotor helicopter,” according to the company’s website — made its inaugural flight.
Sikorsky combat rescue helicopters debuted in World War II and have seen service ever since. Their highest-profile roles include retrieving astronauts from Mercury, Gemini and Apollo space capsules that splashed down at sea in the 1960s.
In 2014, Sikorsky received its latest contract for presidential helicopters, a $1.24 billion award. When carrying the U.S. chief executive, the choppers use the call sign “Marine One,” an echo of the “Air Force One” designation applied to a government jet with the president on board.
The Black Hawk combat helicopter has become a familiar image in photos and videos, flying U.S. troops in war zones and delivering humanitarian aid after disasters.
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