Regulatory obstacles and strong consumer opposition grounded merger talks between United Technologies and Honeywell (HON) before they could even get off the ground. Even still, simple whispers about a combination of the two ubiquitous technology-product manufacturers caused their securities to spike in trading Monday.
Honeywell held merger talks with officials from UTX within the past two weeks, sources told CNBC yesterday. The tie-up would have created a behemoth that would have approached $100 billion in annual sales.
We say would have because UTX put the kibosh on any potential merger, saying that the deal would face insurmountable regulatory and consumer opposition.
Charts show that UTX and HON were never really committed to each other.
The size of each of these companies alone would have made a merger a grand undertaking. Honeywell employs 127,000 people including 22,000 engineers. Meanwhile UTX employs 196,000 people and ranks as the country's 45th largest corporation. The two companies had 2015 net sales of $38.6 billion and $58 billion, respectively.
Yet, the size of the two companies is also what made a merger between them so appetizing.
As industrials consolidate, which giant most needs a merger? https://t.co/ja5CYMv9dN¿ RealMoney (@TSTRealMoney) February 23, 2016
The combination of both United Technologies and Honeywell could "suddenly have muscle against Airbus (EADSY) and Boeing (BA)," TheStreet's Jim Cramer said on CNBC's Squawk on the Street. "I like that a lot."
Currently, both companies supply parts for aerospace companies like Boeing and Airbus, which is one of the reasons why CEO Gregory Hayes came out so definitively against the deal today. "You just cant get the deal done," Hayes said in an interview on CNBC today. "It makes for a good headline, but there is just no path forward."
One of Hayes' biggest concerns is the pricing power the combined companies would have and the pushback they would inevitably see from their customers. Combined, Hayes says the companies' aerospace businesses would generate about $50 billion in revenue annually. UTX's aerospace division accounts for 25% of its overall profits.
Outside watchers have suggested that UTX's hesitation to move forward with a merger has less to do with its regulatory and consumer concerns and more to do with governance issues.
UTX originally approached Honeywell about a tie-up in May last year, seemingly unconcerned about regulatory hurdles. But once the company was approached by Honeywell, with the idea of Honeywell executives overseeing the combined company, the talks fell apart.
Hayes denied that accusation today.
"Clearly we laid out, up front, that there would be an issue of regulatory approval. As the year went by and we heard from customers and we saw what was happening in the U.S. and the EU, it became very apparent to us that this was difficult."
Read Jim Cramer's take on the seemingly dead HON/UTX merger.
Regardless of whether UTX's trepidation comes from governance concerns or regulatory concerns, as it stands now this deal is dead in the water. Though, as Real Money's Jim Cramer wrote this morning, there may be a path forward for Honeywell.
"If the goal is to get a bigger piece of the aerospace pie and still have value-added technologies, I think Alcoa (AA) would easily pass muster and sure wouldn't cost much at all, as it is an $11 billion company with lots of that market cap going away.
"Given the depression that Alcoa's stock's been in because of the commodity side of the business, I don't know if it even makes sense to wait. The spin-off plans are done. It's turnkey. And if it isn't done by Honeywell, I bet someone else will do it," Cramer wrote.
What do you think? Which of these industrial giants needs a merger the most -- Honeywell, UTX or General Electric (GE). Follow us on Twitter @tstrealmoney and vote in our poll.