Textron’s Bell Helicopters would be a great match for the Sikorsky helicopter business, owned by the massive conglomerate United Technologies Corporation (NYSE:UTX). Previously in 2009, the chief of the Sikorsky division commented at an investor meeting that the consolidation of Bell and Sikorsky into a single company would be “an interesting hypothesis.” This leads one to believe that not only would an acquisition by United Technologies be a good idea, but that it is a good idea that was already on the minds of United Technologies executives in the not too distant past.
An even better match for Bell could be The Boeing Company (NYSE:BA). The two companies currently collaborate together to make the Bell-Boeing V-22 Osprey tiltrotor aircraft (basically a helicopter that converts mid-air into a plane, and vice versa). The two companies were recently awarded with a $6.5 billion contract in June to supply 99 of these aircraft to the U.S. Marine Corps and the U.S. Air Force, with the option for an additional 23 aircraft. Acquiring Bell would allow Boeing to capture all of the future growth from the V-22 program, as well as integrate Bell’s other helicopter models into Boeing’s own rotorcraft division.
The other Textron businesses would also be able to find suitors on their own. The Cessna business would make an attractive target for General Dynamics Corporation (NYSE:GD), which owns the Gulfstream brand of business jets. And the defense business of Textron Systems might make sense for Northrop Grumman Corporation (NYSE:NOC). The unmanned aircraft produced by Textron Systems could be absorbed fairly easily into Northrop Grumman’s Aerospace Systems division, which also makes unnamed aircraft.
Past Breakup Speculation
On January 11 of 2012, shares of Textron closed up 5.7% on a down day for the S&P 500. The reason for that jump was a Reuters report that indicated that Textron management was exploring its options, including the possibility of spinning-off some of the company’s businesses.
A year and half later, and there has been little public progress made on that front, while the market seems to have mostly forgotten about that possible development. But the initial stock move on mere speculation demonstrated perfectly how the market would greet an actual breakup announcement if management decided to go down that road.
Foolish Bottom Line
As Textron continues to recover from the troubles of the financial crisis, the individual parts of the company will begin to look more and more attractive to prospective buyers, making a breakup of the company much more likely than during the lows of 2008-2010. While the company is not there yet, there appears to be great potential for Textron and its shareholders in the years to come.
The article The Market Wants to Break up With Textron originally appeared on Fool.com and is written by Matthew Luke.
Matthew Luke owns shares of Textron. The Motley Fool recommends Beam. The Motley Fool owns shares of General Dynamics, General Electric Company, Northrop Grumman, and Textron. Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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