Back in 2000, General Electric (GE) wanted nothing more than to acquire its then-struggling rival Honeywell (HON) in an effort to beef up its share in the industrial market at a discount.
But then, in 2001, the European Union stepped on its toes on anticompetitive grounds.
"The EU's decision to block the transaction triggered a firestorm of criticism, not just from the U.S. antitrust agencies and senior administration officials, but also from the business community generally and from leading economists, antitrust legal scholars, and editorial writers," the Justice Department then said in a statement.
This all sounds remarkably similar to the recent talks between Honeywell and United Technologies (UTX), which appear to have fallen apart over antitrust concerns. That's largely because regulators have been keeping a close eye on the manufacturing world -- from jet-engine makers to producers of wind turbines and offshore drilling equipment -- which is under renewed pressure to combine.
And pressure has been especially mounting on the heels of Johnson Controls' (JCI) January announcement it will combine with Ireland-based manufacturer Tyco (TYI) for $16.5 billion, and GE's largest acquisition in history last fall, a $10 billion bid for French turbine manufacturer Alstom's (ALSMY) power businesses. (GE is in the process of scrapping most of its lending arm GE Capital, while making a more aggressive push to grow a range of industrial segments from jet-engine manufacturing to sub-sea drilling services.)
The chief advantage of a Honeywell-UTX merger would be to take a bigger bite out of the market, but the EU and U.S. regulators are monitoring deals to see if market stakes are too large. (GE's Alstom deal encountered months of EU regulatory road blocks, resulting in a divestiture of some assets to Italian rival Ansaldo.) Antitrust concerns were reported to be ithe primary reason the Honeywell-UTX merger talks fell apart.
The Honeywell-UTX link-up would chiefly raise concerns over the scale of the companies' jet-engine manufacturing segments, as the two produced a combined $43 billion in sales tied to aerospace last year, trailed by $25 billion and $19 billion at GE and Rolls Royce, respectively.
"Our investigation revealed that GE and Honeywell operate in intensely competitive markets," the Justice Department said in its 2001 report. "GE is a leading producer of jet engines for large commercial aircraft and large regional jets. Its two principal rivals are Pratt & Whitney (a subsidiary of United Technologies) and Rolls Royce."
The other goal in a Honeywell-UTX combination would be to capture overlaps in their various sectors to trim costs, similar to how GE has found ways to cross-pollinate its businesses in unexpected ways -- such as using health-care imaging equipment for offshore drilling and looping nearly all of its operations under the umbrella of its so-called Industrial Internet.
"Since early 2015, the two companies had apparently held three sets of discussions. In early 2015, UTC had approached Honeywell for a merger of equals, whereas in late 2015 and earlier this year, Honeywell approached UTC to discuss a prospective merger and offered to pay a modest premium for UTC (most recently reported to be about $108 per share)," William Blair analyst Nick Heymann said in a Tuesday investment note. "
"One basis for a potential merger might be strategic, as Honeywell generates about 70% of its sales from UTC's aerospace and building solutions end-markets," he said. "While most of the common markets are complementary, there is some overlap in aerospace components and building control systems."