United Technologies Corporation
UNITED TECHNOLOGIES CORP /DE/ (Form: S-4/A, Received: 12/04/2017 08:14:11)
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As filed with the Securities and Exchange Commission on December 4, 2017

Registration No. 333-220883

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 2

TO

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

United Technologies Corporation

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   3724   06-0570975

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

10 Farm Springs Road

Farmington, Connecticut 06032

(860) 728-7000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Charles D. Gill

Executive Vice President & General Counsel

10 Farm Springs Road

Farmington, Connecticut 06032

(860) 728-7800

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies of all communications, including communications sent to agent for service, should be sent to:

 

Joshua R. Cammaker

Edward J. Lee

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

(212) 403-1000

 

Robert J. Perna

Senior Vice President, General

Counsel & Secretary

Rockwell Collins, Inc.

400 Collins Road N.E.

Cedar Rapids, Iowa 52498

(319) 263-0212

 

Charles W. Mulaney, Jr.

Richard C. Witzel, Jr.

Skadden, Arps, Slate,

Meagher & Flom LLP

155 North Wacker Drive

Chicago, Illinois 60606

(312) 407-0700

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective and all other conditions to the proposed merger described in the enclosed proxy statement/prospectus have been satisfied or waived.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer       Accelerated filer  
Non-accelerated filer     (Do not check if a smaller reporting company)   Smaller reporting company  
      Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this proxy statement/prospectus is not complete and may be changed. We may not sell the securities offered by this proxy statement/prospectus until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction where an offer, solicitation or sale is not permitted.

 

PRELIMINARY, SUBJECT TO COMPLETION, DATED DECEMBER 4, 2017

 

 

LOGO

TRANSACTION PROPOSED—YOUR VOTE IS VERY IMPORTANT

Dear Shareowners:

On September 4, 2017, Rockwell Collins, Inc., or Rockwell Collins, United Technologies Corporation, or UTC, and Riveter Merger Sub Corp., a wholly owned subsidiary of UTC, or Merger Sub, entered into an Agreement and Plan of Merger that provides for the acquisition of Rockwell Collins by UTC. Subject to approval of Rockwell Collins shareowners and the satisfaction or (to the extent permitted by law) waiver of certain other closing conditions, UTC will acquire Rockwell Collins through the merger of Merger Sub with and into Rockwell Collins, with Rockwell Collins surviving the merger and becoming a wholly owned subsidiary of UTC.

If the merger is completed, each share of Rockwell Collins common stock (other than (1) shares held by Rockwell Collins as treasury stock, UTC, or any subsidiaries of Rockwell Collins or UTC and (2) shares held by a holder who has properly exercised and perfected (and not effectively withdrawn or lost) such holder’s demand for appraisal rights under the General Corporation Law of the State of Delaware) will be converted into (a) $93.33 in cash, without interest, plus (b) a fraction of a share of UTC common stock equal to the quotient obtained by dividing $46.67 by the average of the volume-weighted average prices per share of UTC common stock over a specified period of time before the closing of the merger, which is referred to as the UTC stock price, subject to adjustment pursuant to the terms of the merger agreement as further described below. The fraction of a share of UTC common stock into which each such share of Rockwell Collins common stock will be converted is referred to as the exchange ratio. This exchange ratio will depend upon the price of UTC common stock during a specified period prior to the closing of the merger. In addition, if the UTC stock price is less than or equal to $107.01 or greater than or equal to $124.37, a two-way collar mechanism will apply, pursuant to which (i) if the UTC stock price is greater than or equal to $124.37, the exchange ratio will be fixed at 0.37525 and the value of the stock consideration will be more than $46.67, and (ii) if the UTC stock price is less than or equal to $107.01, the exchange ratio will be fixed at 0.43613 and the value of the stock consideration will be less than $46.67. For more details on the calculation of the UTC stock price, the calculation of the exchange ratio and the two-way collar mechanism, see “The Merger Agreement—Merger Consideration” beginning on page 101.

If the UTC stock price was calculated based on the average of the volume-weighted average prices per share of UTC common stock for each of the 20 consecutive trading days ending immediately prior to November 30, 2017, the most recent practicable date for which such information was available, holders of Rockwell Collins common stock would receive $93.33 in cash, without interest, plus 0.39434 shares of UTC common stock, representing total merger consideration of approximately $140.00 per share of Rockwell Collins common stock. The actual value of the merger consideration may well differ from this example, given the UTC stock price and exchange ratio will not be determinable until the trading day prior to the closing of the merger. The common stock of UTC is listed on the New York Stock Exchange under the symbol “UTX,” and the common stock of Rockwell Collins is listed on the New York Stock Exchange under the symbol “COL.” We urge you to obtain current market quotations for the shares of common stock of UTC and Rockwell Collins.

Rockwell Collins is holding a special meeting of its shareowners to vote on the proposals necessary to complete the merger. Information about this meeting, the merger and the other business to be considered by shareowners at the special meeting is contained in this proxy statement/prospectus. Any shareowner entitled to attend and vote at the special meeting is entitled to appoint a proxy to attend and vote on such shareowner’s behalf. Such proxy need not be a holder of Rockwell Collins common stock. We urge you to read this proxy statement/prospectus and the annexes and documents incorporated by reference carefully. You should also carefully consider the risks that are described in the “ Risk Factors ” section beginning on page 39 .

Your vote is very important regardless of the number of shares of Rockwell Collins common stock that you own. The merger cannot be completed without the adoption of the merger agreement and approval of the merger by the affirmative vote of holders of a majority of the shares of Rockwell Collins common stock outstanding and entitled to vote at the special meeting. A failure to vote your shares, or to provide instructions to your broker, bank or nominee as to how to vote your shares, is the equivalent of a vote against the proposal to adopt the merger agreement and approve the merger.

Whether or not you plan to attend the special meeting of shareowners, please submit your proxy as soon as possible to make sure that your shares are represented at the meeting.

[                    ]

Robert K. Ortberg

Chairman, President and

Chief Executive Officer

Rockwell Collins, Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger or the other transactions described in this proxy statement/prospectus or the securities to be issued in connection with the merger or determined if this proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated [                    ] and is first being mailed to shareowners of Rockwell Collins on or about [                    ].


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LOGO

 

ROCKWELL COLLINS, INC.

400 Collins Road N.E.

Cedar Rapids, Iowa 52498

NOTICE OF SPECIAL MEETING OF SHAREOWNERS

To be held on [                    ]

To the Shareowners of Rockwell Collins, Inc.:

We are pleased to invite you to attend the special meeting of shareowners of Rockwell Collins, Inc., a Delaware corporation, which will be held at The Cedar Rapids Marriott, 1200 Collins Road N.E., Cedar Rapids, Iowa on [                    ], at 8:30 a.m. (Central Time) for the following purposes:

1. Adoption of the Merger Agreement . To vote on a proposal to adopt the Agreement and Plan of Merger, dated as of September 4, 2017, by and among United Technologies Corporation, Riveter Merger Sub Corp. and Rockwell Collins, Inc. (which is referred to as the merger agreement), and approve the merger contemplated thereby, which is further described in the sections titled “The Merger” and “The Merger Agreement,” beginning on pages 52 and 101, respectively, and a copy of which is attached as Annex A to the proxy statement/prospectus accompanying this notice, which is referred to as the merger proposal;

2. Merger-Related Compensation . To vote on a proposal to approve, by advisory (non-binding) vote, certain compensation arrangements that may be paid or become payable to Rockwell Collins’ named executive officers in connection with the merger contemplated by the merger agreement, which is referred to as the merger-related compensation proposal; and

3. Adjournment or Postponement of the Special Meeting . To vote on a proposal to approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the special meeting to approve the merger proposal, which is referred to as the adjournment proposal.

Rockwell Collins will transact no other business at the special meeting except such business as may properly be brought before the special meeting or any adjournment or postponement thereof by or at the direction of the Rockwell Collins board of directors, which is referred to as the Rockwell Collins Board. Please refer to the proxy statement/prospectus of which this notice is a part for further information with respect to the business to be transacted at the special meeting.

The Rockwell Collins Board has fixed the close of business on [                    ] as the record date for the special meeting. Only Rockwell Collins shareowners of record at that time are entitled to receive notice of, and to vote at, the special meeting or any adjournment or postponement thereof. A complete list of such shareowners will be available for inspection by any shareowner for any purpose germane to the special meeting during ordinary business hours for the 10 days preceding the special meeting at 400 Collins Road N.E., Cedar Rapids, Iowa. The eligible Rockwell Collins shareowner list will also be available at the special meeting for examination by any shareowner of record present at such meeting.

Completion of the merger is conditioned upon adoption of the merger agreement and approval of the merger by the Rockwell Collins shareowners, which requires the affirmative vote of holders of a majority of the shares of Rockwell Collins common stock outstanding and entitled to vote at the special meeting.


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The Rockwell Collins Board has unanimously approved the merger agreement and the transactions contemplated by the merger agreement, declared the merger agreement advisable and in the best interest of Rockwell Collins and its shareowners, and unanimously recommends that Rockwell Collins shareowners vote:

 

    “FOR” the merger proposal;

 

    “FOR” the merger-related compensation proposal; and

 

    “FOR” the adjournment proposal.

Your vote is very important regardless of the number of shares of common stock that you own. A failure to vote your shares, or to provide instructions to your broker, bank or nominee as to how to vote your shares, is the equivalent of a vote against the merger proposal. Whether or not you expect to attend the special meeting in person, to ensure your representation at the special meeting, we urge you to submit a proxy to vote your shares as promptly as possible by (1)  visiting the Internet site listed on the proxy card, (2)  calling the toll-free number listed on the Rockwell Collins proxy card or (3)  submitting your proxy card by mail by using the provided self-addressed, stamped envelope. Submitting a proxy will not prevent you from voting in person, but it will help to secure a quorum and avoid added solicitation costs. Any eligible holder of Rockwell Collins stock who is present at the special meeting may vote in person, thereby revoking any previous proxy. In addition, a proxy may also be revoked in writing before the special meeting in the manner described in the accompanying document. If your shares are held in the name of a broker, bank or other nominee, please follow the instructions on the voting instruction card furnished by the broker, bank or other nominee. If you have shares allocated to your account under the Rockwell Collins Retirement Savings Plan or the B/E Aerospace, Inc. Savings Plan, you may direct the plan trustee of the respective plan regarding how to vote the shares allocated to your account. If you are an employee of Rockwell Collins with regular computer access as an integral part of your job duties, you will receive an email with instructions on how to direct the trustee to vote the shares allocated to your account under the plan. If shares are allocated to your account under the Rockwell Collins Retirement Savings Plan and you are not an employee, or you are an employee but do not have regular computer access as an integral part of your job duties, you can direct the trustee on how to vote the shares allocated to your plan account by following the instructions described in (1), (2) or (3) above. If shares are allocated to your account under the B/E Aerospace, Inc. Savings Plan, you may also direct the plan trustee on how to vote such shares by following the instructions described in (1), (2) or (3) above.

The enclosed proxy statement/prospectus provides a detailed description of the merger and the merger agreement and the other matters to be considered at the special meeting. We urge you to carefully read this proxy statement/prospectus, including any documents incorporated by reference herein, and the annexes in their entirety. If you have any questions concerning the merger or this proxy statement/prospectus, would like additional copies or need help voting your shares of common stock, please contact Rockwell Collins’ proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

(877) 825-8772 (toll-free)

(212) 750-5833 (collect)

By Order of the Rockwell Collins, Inc. Board of Directors,

 

[                    ]

Robert J. Perna

Secretary

Cedar Rapids, Iowa

            [                     ]


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REFERENCES TO ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates by reference important business and financial information about UTC and Rockwell Collins from other documents that are not included in or delivered with this proxy statement/prospectus. For a listing of the documents incorporated by reference into this proxy statement/prospectus, see “Where You Can Find More Information” beginning on page 174.

You can obtain any of the documents incorporated by reference into this proxy statement/prospectus by requesting them in writing or by telephone as follows:

For information related to Rockwell Collins:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

(877) 825-8772 (toll-free)

(212) 750-5833 (collect)

For information related to UTC:

United Technologies Corporation

10 Farm Springs Road

Farmington, Connecticut 06032

Attention: Investor Relations

(860) 728-7608

To receive timely delivery of the documents in advance of the special meeting, you should make your request no later than [                    ], which is five business days before the special meeting.

You may also obtain any of the documents incorporated by reference into this proxy statement/prospectus without charge through the Securities and Exchange Commission website at www.sec.gov . In addition, you may obtain copies of documents filed by UTC with the SEC on UTC’s Internet website at http://www.utc.com under the tab “Investors,” then under the tab “SEC Filings” or by contacting UTC’s Investor Relations at United Technologies, 10 Farm Springs Road, Farmington, Connecticut 06032 or by calling (860) 728-7608. You may also obtain copies of documents filed by Rockwell Collins with the SEC on Rockwell Collins’ Internet website at http://www.rockwellcollins.com under the tab “Investor Relations” and then under the heading “SEC Filings” or by contacting Rockwell Collins’ Investor Relations at Rockwell Collins, 400 Collins Road N.E., Cedar Rapids, Iowa 52498 or by calling (319) 295-7575.

We are not incorporating the contents of the websites of the SEC, UTC, Rockwell Collins, or any other entity into this proxy statement/prospectus. We are providing the information about how you can obtain certain documents that are incorporated by reference into this proxy statement/prospectus at these websites only for your convenience.

 

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ABOUT THIS PROXY STATEMENT/PROSPECTUS

This proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the SEC by UTC (File No. 333-220883), constitutes a prospectus of UTC under Section 5 of the Securities Act of 1933, as amended, which is referred to as the Securities Act, with respect to the shares of common stock, par value $1.00 per share, of UTC to be issued to Rockwell Collins shareowners pursuant to the merger agreement. This document also constitutes a proxy statement of Rockwell Collins under Section 14(a) of the Securities Exchange Act of 1934, as amended, which is referred to as the Exchange Act. It also constitutes a notice of meeting with respect to the Rockwell Collins shareowners’ meeting, at which Rockwell Collins shareowners will be asked to consider and vote upon the proposal to adopt the merger agreement and approve the merger and certain other proposals.

All references in this proxy statement/prospectus to UTC refer to United Technologies Corporation, a Delaware corporation, and/or its consolidated subsidiaries, unless the context requires otherwise. All references in this proxy statement/prospectus to Rockwell Collins refer to Rockwell Collins, Inc., a Delaware corporation, and/or its consolidated subsidiaries, unless the context requires otherwise. All references in this proxy statement/prospectus to Merger Sub refer to Riveter Merger Sub Corp., a Delaware corporation and wholly owned subsidiary of UTC, unless the context requires otherwise.

UTC has supplied all information contained or incorporated by reference into this proxy statement/prospectus relating to UTC and Riveter Merger Sub Corp., and Rockwell Collins has supplied all such information relating to Rockwell Collins.

You should rely only on the information contained in or incorporated by reference into this proxy statement/prospectus. UTC and Rockwell Collins have not authorized anyone to provide you with information that is different from that contained in or incorporated by reference into this proxy statement/prospectus. This proxy statement/prospectus is dated as of the date set forth above on the cover page of this proxy statement/prospectus, and you should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than such date. Further, you should not assume that the information incorporated by reference into this proxy statement/prospectus is accurate as of any date other than the date of the incorporated document. Neither the mailing of this proxy statement/prospectus to Rockwell Collins shareowners nor the issuance by UTC of shares of common stock pursuant to the merger agreement will create any implication to the contrary.

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

 

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TABLE OF CONTENTS

 

     Page  

QUESTIONS & ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

     1  

SUMMARY

     12  

The Parties

     12  

The Merger

     14  

Merger Consideration

     14  

Treatment of Equity Awards

     15  

Financing of the Merger and Treatment of Existing Debt

     16  

Recommendation of the Rockwell Collins Board of Directors

     17  

Opinions of Rockwell Collins’ Financial Advisors

     17  

Interests of Rockwell Collins’ Directors and Executive Officers in the Merger

     18  

Information about the Rockwell Collins Shareowners’ Meeting

     19  

Voting by Rockwell Collins Directors and Executive Officers

     21  

Regulatory Approvals

     21  

Litigation Relating to the Merger

     22  

Conditions to Completion of the Merger

     22  

Timing of the Merger

     22  

No Solicitation

     22  

Termination of the Merger Agreement; Termination Fee

     23  

Appraisal Rights of Rockwell Collins Shareowners

     25  

U.S. Federal Income Tax Consequences

     25  

Accounting Treatment

     26  

Risk Factors

     26  

SELECTED HISTORICAL FINANCIAL DATA

     27  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF UTC

     27  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF ROCKWELL COLLINS

     29  

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     31  

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

     32  

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

     34  

UTC Market Price and Dividend Information

     34  

Rockwell Collins Market Price and Dividend Information

     35  

Comparison of UTC and Rockwell Collins Market Prices and Implied Value of Merger Consideration

     35  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     37  

RISK FACTORS

     39  

Risks Related to the Merger

     39  

Risks Related to the Combined Company After Completion of the Merger

     44  

Other Risk Factors

     48  

 

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     Page  

THE PARTIES TO THE MERGER

     49  

UTC

     49  

Rockwell Collins

     50  

Riveter Merger Sub Corp .

     51  

THE MERGER

     52  

Background of the Merger

     52  

Rockwell Collins Board of Directors’ Recommendation and Reasons for the Merger

     61  

Opinions of Rockwell Collins’ Financial Advisors

     66  

Certain Rockwell Collins Unaudited Prospective Financial Information

     79  

Interests of Directors and Executive Officers of Rockwell Collins in the Merger

     84  

Director and Officer Indemnification

     94  

Financing of the Merger and Treatment of Existing Debt

     94  

Regulatory Approvals

     95  

Timing of the Merger

     95  

U.S. Federal Income Tax Consequences

     95  

Accounting Treatment

     99  

NYSE Listing; Delisting and Deregistration of Rockwell Collins Common Stock

     99  

Litigation Relating to the Merger

     100  

UTC’s Dividend Policy

     100  

Restrictions on Sales of Shares of UTC Common Stock Received in the Merger

     100  

THE MERGER AGREEMENT

     101  

Explanatory Note Regarding the Merger Agreement

     101  

Structure of the Merger

     101  

Merger Consideration

     101  

Treatment of Equity Awards

     103  

Closing and Effectiveness of the Merger

     104  

Conversion of Shares; Exchange of Certificates; Fractional Shares

     104  

Representations and Warranties; Material Adverse Effect

     105  

Covenants and Agreements

     108  

Conditions to the Merger

     120  

Termination

     122  

Effect of Termination

     123  

Termination Fee and Expense Reimbursement

     124  

Expenses

     125  

Amendment and Waiver

     125  

Third-Party Beneficiaries

     125  

Governing Law; Jurisdiction; Waiver of Jury Trial

     126  

Enforcement

     126  

THE SPECIAL MEETING

     127  

 

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     Page  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     135  

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     140  

BENEFICIAL OWNERSHIP TABLE

     152  

COMPARISON OF SHAREOWNER RIGHTS

     154  

APPRAISAL RIGHTS

     167  

VALIDITY OF COMMON SHARES

     171  

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     171  

SHAREOWNER PROPOSALS

     172  

HOUSEHOLDING OF PROXY MATERIALS

     173  

WHERE YOU CAN FIND MORE INFORMATION

     174  
Annex A: Agreement and Plan of Merger      A-1  
Annex B: Opinion of J.P. Morgan Securities LLC      B-1  
Annex C: Opinion of Citigroup Global Markets Inc.      C-1  
Annex D: Section 262 of the Delaware General Corporation Law      D-1  

 

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QUESTIONS & ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

The following questions and answers briefly address some commonly asked questions about the merger, the merger agreement and the special meeting. They may not include all the information that is important to shareowners of Rockwell Collins. Shareowners should carefully read this entire proxy statement/prospectus, including the annexes and the other documents referred to or incorporated by reference herein.

 

  Q: What is the merger?

 

  A: UTC, Rockwell Collins and Merger Sub have entered into an Agreement and Plan of Merger, dated as of September 4, 2017, which (as the same may be amended from time to time) is referred to as the merger agreement. A copy of the merger agreement is attached as Annex A to this proxy statement/prospectus. The merger agreement contains the terms and conditions of the proposed acquisition of Rockwell Collins by UTC. Under the merger agreement, subject to satisfaction or (to the extent permitted by law) waiver of the conditions set forth in the merger agreement and described hereinafter, Merger Sub will merge with and into Rockwell Collins, with Rockwell Collins continuing as the surviving corporation and a wholly owned subsidiary of UTC, in a transaction which is referred to as the merger. As a result of the merger, Rockwell Collins will no longer be a publicly-held company. Following the merger, Rockwell Collins common stock will be delisted from the New York Stock Exchange, which is referred to as the NYSE, and deregistered under the Exchange Act.

 

  Q: Why am I receiving these materials?

 

  A: Rockwell Collins is sending these materials to its shareowners to help them decide how to vote their shares of common stock with respect to the merger and other matters to be considered at the special meeting.

The merger cannot be completed unless Rockwell Collins shareowners adopt the merger agreement and approve the merger. Rockwell Collins is holding a special meeting of its shareowners to vote on the proposals necessary to complete the merger. Information about the special meeting, the merger, the merger agreement and the other business to be considered by shareowners at the special meeting is contained in this proxy statement/prospectus.

This proxy statement/prospectus constitutes both a proxy statement of Rockwell Collins and a prospectus of UTC. It is a proxy statement because the Rockwell Collins board of directors, which is referred to as the Rockwell Collins Board, is soliciting proxies from its shareowners. It is a prospectus because UTC will issue shares of its common stock in exchange for outstanding shares of Rockwell Collins common stock in the merger. This proxy statement/prospectus includes important information about the merger, the merger agreement and the special meeting. Rockwell Collins shareowners should read this information carefully and in its entirety. The enclosed voting materials allow shareowners to vote their shares by proxy without attending the special meeting in person.

 

  Q: What will Rockwell Collins shareowners receive in the merger?

 

  A:

If the merger is completed, each share of Rockwell Collins common stock (other than (1) shares held by Rockwell Collins as treasury stock, UTC, or any subsidiaries of Rockwell Collins or UTC and (2) shares held by a holder who has properly exercised and perfected (and not effectively withdrawn or lost) such holder’s demand for appraisal rights under the General Corporation Law of the State of Delaware (which is referred to as the DGCL), both of which are collectively referred to herein as excluded shares) will be converted into (a) $93.33 in cash, without interest, plus (b) a fraction of a share of UTC common stock equal to the quotient obtained by dividing $46.67 by the average of the volume-weighted average prices per share of UTC common stock over a specified period of time before the closing of the merger (referred to herein as the UTC stock price), subject to adjustment pursuant to the terms of the merger agreement. The cash and UTC stock payable in exchange for each such share of Rockwell Collins common stock are collectively referred to as the merger consideration.


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  The fraction of a share of UTC common stock into which each such share of Rockwell Collins common stock will be converted is referred to as the exchange ratio. The exchange ratio is described in more detail in “The Merger Agreement—Merger Consideration” beginning on page 101. If the UTC stock price is greater than $107.01 but less than $124.37, the exchange ratio will be equal to the quotient of (i) $46.67 divided by (ii) the UTC stock price, which, in each case, will result in the stock consideration having a value equal to $46.67. If the UTC stock price is less than or equal to $107.01 or greater than or equal to $124.37, a two-way collar mechanism will apply pursuant to which, (x) if the UTC stock price is greater than or equal to $124.37, the exchange ratio will be fixed at 0.37525 and the value of the stock consideration will be more than $46.67, and (y) if the UTC stock price is less than or equal to $107.01, the exchange ratio will be fixed at 0.43613 and the value of the stock consideration will be less than $46.67.

All fractional shares of UTC common stock that would otherwise be issued to a Rockwell Collins shareowner of record as part of the merger consideration will be aggregated to create whole shares of UTC common stock that will be issued to shareowners as part of the merger consideration. If a fractional share of UTC common stock remains payable to a Rockwell Collins shareowner after aggregating all fractional shares of UTC common stock payable to such Rockwell Collins shareowner, then such shareowner will be paid, in lieu of such remaining fractional share of UTC common stock, an amount in cash, without interest, rounded down to the nearest cent, equal to the product of (1) the amount of the fractional share interest in a share of UTC common stock to which such holder would otherwise be entitled (rounded to three decimal places) and (2) the UTC stock price.

 

  Q: How will UTC pay the cash component of the merger consideration?

 

  A: UTC’s obligation to complete the merger is not conditioned upon its obtaining financing. UTC anticipates that approximately $15 billion will be required to pay the aggregate cash portion of the merger consideration to the Rockwell Collins shareowners. UTC intends to fund the cash component of the merger through sources of debt financing and cash on hand. In connection with entering into the merger agreement, UTC entered into a commitment letter that provided a one-year commitment, subject to an extension to eighteen months under certain circumstances, for a $6.5 billion 364-day unsecured bridge loan facility. On October 6, 2017, in accordance with, and consistent with the terms set forth in, the commitment letter, UTC entered into a $6.5 billion 364-day unsecured bridge loan credit agreement, with the lenders party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent. The commitments under the bridge credit agreement terminate on September 4, 2018 or, under certain circumstances, on March 4, 2019.

For a more complete description of sources of funding for the merger and related costs, see “The Merger—Financing of the Merger and Treatment of Existing Debt” beginning on page 94.

 

  Q: What equity stake will Rockwell Collins shareowners hold in UTC immediately following the merger?

 

  A: Upon the completion of the merger, based on minimum and maximum exchange ratios of 0.37525 and 0.43613, the estimated number of shares of UTC common stock issuable as a portion of the merger consideration is between 62 million shares and 72 million shares, which will result in former Rockwell Collins shareowners holding approximately 7% to 8% of the outstanding fully diluted UTC common stock, based on the number of outstanding shares of common stock and outstanding stock-based awards of UTC and Rockwell Collins as of November 30, 2017.

For more details on the calculation of the UTC stock price, the calculation of the exchange ratio and the two-way collar mechanism, see “The Merger Agreement—Merger Consideration” beginning on page 101.

 

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  Q: When do UTC and Rockwell Collins expect to complete the transaction?

 

  A: UTC and Rockwell Collins are working to complete the transaction as soon as practicable. We currently expect that the transaction will be completed by the third quarter of 2018. Neither UTC nor Rockwell Collins can predict, however, the actual date on which the transaction will be completed because it is subject to conditions beyond each company’s control, including obtaining the necessary regulatory approvals.

 

  Q: What are the conditions to completion of the merger?

 

  A: In addition to the approval of the merger proposal by Rockwell Collins shareowners as described above, completion of the merger is subject to the satisfaction of a number of other conditions, including (1) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which is referred to as the HSR Act, and the approval of regulatory authorities (or expiration of applicable waiting periods) in the European Union, Brazil, Canada, China, Japan, the Philippines, Russia, South Korea, Taiwan and Turkey and under the foreign investment laws of France having been obtained and remaining in full force and effect, in each case without the imposition, individually or in the aggregate, of an unacceptable condition (see the definition of “unacceptable condition” on page 114), (2) no governmental authority of competent jurisdiction having issued or entered any order or enacted any law after the date of the merger agreement having the effect of enjoining or otherwise prohibiting the completion of the merger or resulting, individually or in the aggregate, in an unacceptable condition and (3) the absence of a material adverse effect (as defined in the merger agreement) on either UTC or Rockwell Collins.

See “The Merger Agreement—Conditions to the Merger” beginning on page 120.

 

  Q: What am I being asked to vote on, and why is this approval necessary?

 

  A: Rockwell Collins shareowners are being asked to vote on the following proposals:

1. Adoption of the Merger Agreement . To vote on a proposal to adopt the merger agreement and approve the merger contemplated thereby, which is further described in the sections titled “The Merger” and “The Merger Agreement,” beginning on pages 52 and 101, respectively, and a copy of which is attached as Annex A to the proxy statement/prospectus accompanying this notice, which is referred to as the merger proposal;

2. Merger-Related Compensation . To vote on a proposal to approve, by advisory (non-binding) vote, certain compensation arrangements for Rockwell Collins’ named executive officers in connection with the merger contemplated by the merger agreement, which is referred to as the merger-related compensation proposal; and

3. Adjournment or Postponement of the Special Meeting . To vote on a proposal to approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the special meeting to approve the merger proposal, which is referred to as the adjournment proposal.

Approval of the merger proposal by Rockwell Collins shareowners is required for completion of the merger.

 

  Q: What vote is required to approve each proposal at the Special Meeting?

 

  A: The merger proposal: The affirmative vote of the holders of a majority of the shares of Rockwell Collins common stock outstanding and entitled to vote (in person or by proxy) at the special meeting is required to approve the merger proposal, which is referred to as the shareowner approval.

 

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The merger-related compensation proposal: The affirmative vote of holders of a majority of the shares of Rockwell Collins common stock represented (in person or by proxy) at the special meeting and entitled to vote on the proposal, assuming a quorum, is required to approve the merger-related compensation proposal.

The adjournment proposal: The affirmative vote of holders of a majority of the shares of Rockwell Collins common stock represented (in person or by proxy) at the special meeting and entitled to vote on the proposal, regardless of whether a quorum is present, is required to approve the adjournment proposal.

 

  Q: How many votes do I have?

 

  A: Each Rockwell Collins shareowner is entitled to one vote for each share of Rockwell Collins common stock held of record as of the record date.

As of the close of business on the record date, there were [            ] shares of common stock outstanding. As summarized below, there are some important distinctions between shares held of record and those owned beneficially in street name.

 

  Q: What constitutes a quorum?

 

  A: The presence at the special meeting, in person or by proxy, of the holders of a majority of the shares of Rockwell Collins common stock issued and outstanding on the record date for the special meeting will constitute a quorum for the transaction of business at the special meeting. Abstentions (which are described below) will count for the purpose of determining the presence of a quorum for the transaction of business at the special meeting.

 

  Q: How does the Rockwell Collins Board recommend that I vote?

 

  A: The Rockwell Collins Board unanimously recommends that Rockwell Collins shareowners vote: “ FOR ” the merger proposal, “ FOR ” the merger-related compensation proposal, and “ FOR ” the adjournment proposal.

 

  Q: Why did the Rockwell Collins Board approve the merger agreement and the transactions contemplated by the merger agreement, including the merger?

 

  A: For additional information regarding the Rockwell Collins Board’s reasons for approving and recommending adoption of the merger agreement and the transactions contemplated by the merger agreement, including the merger, see the section entitled “The Merger—Rockwell Collins Board of Directors’ Recommendation and Reasons for the Merger” beginning on page 61.

 

  Q: Do any of Rockwell Collins’ directors or executive officers have interests in the merger that may differ from those of Rockwell Collins shareowners?

 

  A: Rockwell Collins’ non-employee directors and executive officers have certain interests in the merger, that may be different from, or in addition to, the interests of Rockwell Collins shareowners generally. The Rockwell Collins Board was aware of and considered these interests, among other matters, in evaluating the merger agreement and the merger and in recommending that the shareowners adopt the merger agreement. For more information regarding these interests, see “The Merger—Interests of Directors and Executive Officers of Rockwell Collins in the Merger” beginning on page 84.

 

  Q: Why am I being asked to consider and vote on a proposal to approve, by advisory (non-binding) vote, the merger-related executive compensation?

 

  A: Under SEC rules, Rockwell Collins is required to seek an advisory (non-binding) vote with respect to the compensation that may be paid or become payable to its named executive officers that is based on, or otherwise relates to, the merger.

 

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  Q: What happens if the merger-related compensation proposal is not approved?

 

  A: Approval of the merger-related compensation proposal is not a condition to completion of the merger, and because the vote on the merger-related compensation proposal is advisory only, it will not be binding on Rockwell Collins. Accordingly, if the merger is approved and the other conditions to closing are satisfied or waived, the merger will be completed even if the merger-related compensation proposal is not approved. If the merger proposal is approved and the merger is completed, the merger-related compensation will be payable to Rockwell Collins’ named executive officers, subject only to the conditions applicable thereto, regardless of the outcome of the vote on the merger-related compensation proposal.

 

  Q: What do I need to do now?

 

  A: After carefully reading and considering the information contained in this proxy statement/prospectus, please vote your shares as soon as possible so that your shares will be represented at the special meeting. Please follow the instructions set forth on the proxy card or on the voting instruction form provided by the record holder if your shares are held in the name of your broker, bank or other nominee.

Please do not submit your stock certificates at this time. If the merger is completed, you will receive instructions for surrendering your stock certificates in exchange for shares of UTC common stock from the exchange agent.

 

  Q: Does my vote matter?

 

  A: Yes. The merger cannot be completed unless the proposal to adopt the merger agreement is approved by holders of a majority of the shares of Rockwell Collins common stock issued and outstanding. If you fail to submit a proxy or to vote in person at the special meeting, or abstain, or you do not provide your bank, brokerage firm or other nominee with instructions, as applicable, this will have the effect of a vote cast “against” such proposal. The Rockwell Collins Board unanimously recommends that shareowners vote “FOR” the proposal to adopt the merger agreement and approve the merger.

 

  Q: How do I vote?

 

  A: If you are a shareowner of record of Rockwell Collins as of [            ], which is referred to as the record date, you are entitled to receive notice of, and cast a vote at, the special meeting. Each holder of Rockwell Collins common stock is entitled to cast one vote on each matter properly brought before the special meeting for each share of Rockwell Collins common stock that such holder owned of record as of the record date. You may submit your proxy before the special meeting in one of the following ways:

 

    Telephone voting—use the toll-free number shown on your proxy card;

 

    Via the Internet—visit the website shown on your proxy card to vote via the Internet; or

 

    Mail—complete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope.

If you are a shareowner of record, you may also cast your vote in person at the special meeting.

If your shares are held in “street name,” through a broker, bank or other nominee, that institution will send you separate instructions describing the procedure for voting your shares. “Street name” shareowners who wish to vote at the meeting will need to obtain a “legal proxy” form from their broker, bank or other nominee.

 

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  Q: How do I direct the trustee of the plan to vote my shares of common stock held through the Rockwell Collins Retirement Savings Plan or the B/E Aerospace, Inc. Savings Plan?

 

  A: If shares of common stock are allocated to your account under the Rockwell Collins Retirement Savings Plan and you are not an employee of Rockwell Collins, or you are an employee but do not have regular computer access as an integral part of your job duties, you may direct the plan trustee to vote the shares allocated to your account by telephone, mail or via the Internet as described above. You may also direct the trustee to vote your allocated shares by telephone, mail or via the Internet as described above if shares of common stock are allocated to your account under the B/E Aerospace, Inc. Savings Plan. If shares are allocated to your account under the Rockwell Collins Retirement Savings Plan and you are an employee of Rockwell Collins with regular computer access as an integral part of your job duties, you will receive an email with instructions on how to direct the trustee to vote the shares allocated to your account under the plan. If you provide voting directions to the trustee by telephone or via the Internet, your voting instructions must be received before 11:59 p.m. (Central Time) on [            ]. If you provide voting instructions to the trustee by mail, your voting instructions must be received before 6:00 a.m. (Central Time) on [            ]. If shares are allocated to your account under the Rockwell Collins Retirement Savings Plan and you do not timely submit your voting instructions by these deadlines or the deadlines contained in the email instructions, as applicable, the trustee will vote the shares allocated to your account in the same proportion to the shares held in the plan for which directions were timely received. If shares are allocated to your account under the B/E Aerospace, Inc. Savings Plan and you do not timely submit your voting instructions by these deadlines or the deadlines contained in the email instructions, as applicable, the trustee will not vote the shares unless otherwise required by law.

If you hold shares of common stock through one of the plans, you may attend the special meeting. However, shares held through the plans can only be voted by the trustee as described in the above paragraph and you cannot vote such shares in person at the special meeting.

 

  Q: How do I vote if I participate in Rockwell Collins’ Direct Stock Purchase and Dividend Reinvestment Plan?

 

  A: Shareowners participating in the Wells Fargo Shareowner Service Plus Plan that allows for direct stock purchases and dividend reinvestment are record owners, and Wells Fargo will vote the shares that it holds for the participant’s account only in accordance with the proxy returned by the participant to Wells Fargo, or in accordance with instructions given pursuant to our telephone or Internet voting procedures.

 

  Q: What is the difference between holding shares as a shareholder of record and as a beneficial owner?

 

  A: You are a “shareholder of record” if your shares are registered directly in your name with Rockwell Collins’ transfer agent, Wells Fargo Shareowner Services, which is referred to as Wells Fargo. As the shareholder of record, you have the right to vote in person at the special meeting. You may also vote by Internet, telephone or mail, as described in the notice and above under the heading “How do I vote?” You are deemed to beneficially own shares in “street name” if your shares are held by a bank, brokerage firm or other nominee or other similar organization. Your bank, brokerage firm or other nominee will send you, as the beneficial owner, a package describing the procedure for voting your shares. You should follow the instructions provided by them to vote your shares. If you beneficially own your shares, you are invited to attend the special meeting; however, you may not vote your shares in person at the special meeting unless you obtain a “legal proxy” from your bank, brokerage firm or other nominee that holds your shares, giving you the right to vote the shares at the special meeting.

 

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  Q: If my shares are held in “street name” by a broker, bank or other nominee, will my broker, bank or other nominee vote my shares for me?

 

  A: If your shares are held in “street name” in a stock brokerage account or by a broker, bank or other nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your broker, bank or other nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to Rockwell Collins or by voting in person at the special meeting unless you provide a “legal proxy,” which you must obtain from your broker, bank or other nominee. Your broker, bank or other nominee is obligated to provide you with a voting instruction card for you to use.

Brokers who hold shares in street name for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, brokers are not allowed to exercise their voting discretion with respect to the approval of matters determined to be “non-routine” without specific instructions from the beneficial owner. It is expected that all proposals to be voted on at the special meeting are “non-routine” matters. Broker non-votes occur when a broker or nominee is not instructed by the beneficial owner of shares to vote on a particular proposal for which the broker does not have discretionary voting power.

If you are a beneficial owner of Rockwell Collins shares and you do not instruct your broker, bank or other nominee on how to vote your shares:

 

    your broker, bank or other nominee may not vote your shares on the merger proposal, which broker non-votes, if any, will have the same effect as a vote AGAINST such proposal;

 

    your broker, bank or other nominee may not vote your shares on the merger-related compensation proposal, which broker non-votes, if any, will have no effect on the outcome of such proposal (assuming a quorum is present); and

 

    your broker, bank or other nominee may not vote your shares on the adjournment proposal, which broker non-votes, if any, will have no effect on the outcome of such proposal (regardless of whether a quorum is present).

 

  Q: When and where is the special meeting? What must I bring to attend the special meeting?

 

  A: The special meeting of Rockwell Collins shareowners will be held at The Cedar Rapids Marriott, 1200 Collins Road N.E., Cedar Rapids, Iowa on [                    ] at 8:30 a.m. (Central Time). Subject to space availability, all shareowners as of the record date, or their duly appointed proxies, may attend the meeting. Since seating is limited, admission to the meeting will be on a first-come, first-served basis. Registration and seating will begin at 8:00 a.m. (Central Time).

If you wish to attend the special meeting, you must bring photo identification. If you hold your shares through a broker, bank or other nominee, you must also bring proof of ownership such as the voting instruction form from your broker or other nominee or an account statement.

 

  Q: What if I fail to vote or abstain?

 

  A: For purposes of the special meeting, an abstention occurs when a shareowner attends the special meeting in person and does not vote or returns a proxy with an “abstain” instruction.

Merger proposal: An abstention will have the same effect as a vote cast “AGAINST” the merger proposal. If a shareowner is not present in person at the special meeting and does not respond by proxy, it will have the same effect of a vote cast “AGAINST” such proposal.

Merger-related compensation proposal: An abstention will have the same effect as a vote cast “AGAINST” the merger-related compensation proposal. If a shareowner is not present in person at the special meeting and does not respond by proxy, it will have no effect on the outcome of the merger-related compensation proposal (assuming a quorum is present).

 

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Adjournment proposal: An abstention will have the same effect as a vote cast “AGAINST” the adjournment proposal. If a shareowner is not present in person at the special meeting and does not respond by proxy, it will have no effect on the vote count for such proposal (regardless of whether a quorum is present).

 

  Q: What will happen if I return my proxy or voting instruction card without indicating how to vote?

 

  A: If you sign and return your proxy or voting instruction card without indicating how to vote on any particular proposal, the common stock represented by your proxy will be voted as recommended by the Rockwell Collins Board with respect to that proposal.

 

  Q: What happens if I sell my shares of Rockwell Collins common stock after the record date but before the special meeting?

 

  A: The record date for the special meeting (the close of business on [            ]) is earlier than the date of the special meeting and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer your shares of common stock after the record date but before the date of the special meeting, you will retain your right to vote at the special meeting. However, you will not have the right to receive the merger consideration to be received by the shareowners in the merger. In order to receive the merger consideration, you must hold your shares through completion of the merger.

 

  Q: May I change or revoke my vote after I have delivered my proxy or voting instruction card?

 

  A: Yes. If you are a record holder, you may change or revoke your vote before your proxy is voted at the special meeting as described herein. You may do this in one of the following four ways:

 

  (1) by logging onto the Internet website specified on your proxy card in the same manner you would to submit your proxy electronically or by calling the telephone number specified on your proxy card, in each case, if you are eligible to do so;

 

  (2) by sending a notice of revocation to the corporate secretary of Rockwell Collins;

 

  (3) by sending a completed proxy card bearing a later date than your original proxy card; or

 

  (4) by attending the special meeting and voting in person.

If you choose any of the first three methods, you must take the described action no later than the beginning of the special meeting.

If your shares are held in an account at a broker, bank or other nominee and you have delivered your voting instruction card or otherwise given instruction on how to vote your shares to your broker, bank or other nominee, you should contact your broker, bank or other nominee to change your vote.

If your shares are allocated to your account under the Rockwell Collins Retirement Savings Plan and you have directed the plan trustee on how to your vote such shares pursuant to email instruction, you should take the same actions detailed in the email instructions on how to direct the trustee to vote to change such direction to the trustee. If your shares are allocated to your account under the Rockwell Collins Retirement Savings Plan or the B/E Aerospace, Inc. Savings Plan and you have directed the trustee on how to vote such shares by telephone, via the Internet, or by mail, you may change your direction via methods (1), (2) or (3) above, but in any case you must change your vote prior to 11:59 p.m. (Central Time) on [            ] (for shares voted by telephone or Internet) or 6:00 a.m. (Central Time) on [            ] (for shares voted by mail).

 

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  Q: Where can I find the voting results of the special meeting?

 

  A: The preliminary voting results will be announced at the special meeting. In addition, within four business days following certification of the final voting results, Rockwell Collins intends to file the final voting results with the SEC on a Current Report on Form 8-K.

 

  Q: What are the U.S. federal income tax consequences of the merger?

 

  A: The exchange of Rockwell Collins common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes, and may also be a taxable transaction under applicable state, local or non-U.S. income or other tax laws. In general, for U.S. federal income tax purposes, a U.S. holder (as defined in “The Merger—U.S. Federal Income Tax Consequences”) of Rockwell Collins common stock who receives the merger consideration in exchange for such U.S. holder’s shares of Rockwell Collins common stock pursuant to the merger will recognize gain or loss in an amount equal to the difference, if any, between (1) the sum of the fair market value of the UTC common stock and the amount of cash, including cash in lieu of a fractional share of UTC common stock, received in the merger and (2) such U.S. holder’s adjusted tax basis in the shares of Rockwell Collins common stock exchanged therefor.

In certain circumstances, a holder of Rockwell Collins common stock could be treated as receiving a dividend in an amount up to the cash consideration received by such holder in the merger. As a result of the possibility of such deemed dividend treatment, a non-U.S. holder (as defined in “The Merger—U.S. Federal Income Tax Consequences”) of Rockwell Collins common stock may be subject to U.S. withholding tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) with respect to the cash consideration received in the merger.

For a more complete description of the U.S. federal income tax consequences of the merger, see “The Merger—U.S. Federal Income Tax Consequences” beginning on page 95.

This proxy statement/prospectus contains a discussion of the material U.S. federal income tax consequences of the merger. This discussion does not address any non-U.S. tax consequences, nor does it pertain to state or local income or other tax consequences. You should consult your own tax advisors regarding the particular U.S. federal income tax consequences of the merger to you in light of your particular circumstances, as well as the particular tax consequences to you of the merger under any state, local or non-U.S. income or other tax laws.

 

  Q: Are there any risks that I should consider in deciding whether to vote in favor of the merger proposal?

 

  A: Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page 39. You also should read and carefully consider the risk factors of UTC and Rockwell Collins contained in the documents that are incorporated by reference into this proxy statement/prospectus.

 

  Q: Do I have appraisal rights in connection with the transaction?

 

  A:

Subject to the closing of the merger, record holders of Rockwell Collins common stock who do not vote in favor of the merger proposal and otherwise comply fully with the requirements and procedures of Section 262 of the DGCL, may exercise their rights of appraisal, which generally entitle shareowners to receive a lump sum cash payment equal to the fair value of their common stock exclusive of any element of value arising from the accomplishment or expectation of the merger. The “fair value” could be higher or lower than, or the same as, the merger consideration. A detailed description of the appraisal rights and procedures available to Rockwell Collins shareowners is

 

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  included in “Appraisal Rights” beginning on page 167. The full text of Section 262 of the DGCL is attached as Annex D to this proxy statement/prospectus.

 

  Q: What will happen to my stock-based awards?

 

  A: Treatment of Restricted Stock Awards

Upon completion of the merger, each then-outstanding restricted share of Rockwell Collins common stock, referred to as a restricted stock award, will become fully vested and will be canceled and converted into the right to receive the merger consideration in respect of each share of Rockwell Collins common stock subject to such restricted stock award, i.e. , treated in the same manner as all other outstanding shares of Rockwell Collins common stock (other than excluded shares) for such purposes.

Treatment of Restricted Stock Unit Awards

Upon completion of the merger, each then-outstanding restricted stock unit award relating to shares of Rockwell Collins common stock, referred to as an RSU award, that was granted (1) prior to September 4, 2017 or (2) to a non-employee director of Rockwell Collins will become fully vested and will be canceled in exchange for the right to receive the merger consideration in respect of each share of Rockwell Collins common stock subject to such RSU award (with the number of shares subject to any performance-based RSU award deemed to be equal to the target number of shares subject to such award), less applicable tax withholdings.

Upon completion of the merger, each then-outstanding RSU award granted on or after September 4, 2017 (except for RSU awards granted to non-employee directors) will be assumed by UTC and converted into a time-based restricted stock unit award of UTC covering a number of shares of UTC common stock (rounded down to the nearest whole number of shares) equal to the product obtained by multiplying (1) the number of shares of Rockwell Collins common stock subject to the RSU award (with the number of shares subject to any performance-based RSU award deemed to be equal to the target number of shares subject to such award) by (2) an amount referred to as the equity award exchange ratio. The equity award exchange ratio is a number of shares of UTC common stock equal to the sum of (a) the exchange ratio and (b) the quotient (rounded to four decimal places) obtained by dividing the cash consideration by the UTC stock price. Each restricted stock unit award of UTC received in such conversion will be subject to the vesting schedule applicable to the corresponding RSU award and will be settled as provided in the award agreement applicable to corresponding RSU award, subject only to the continued service of the grantee with UTC or the surviving corporation through each applicable vesting date (except in the event of an earlier qualifying termination of service) but will not be subject to any performance conditions following the completion of the merger.

Treatment of Stock Options

Upon completion of the merger, each then-outstanding compensatory option to purchase Rockwell Collins common stock, referred to as a stock option, will be canceled in exchange for the right to receive the merger consideration in respect of each net option share subject to such stock option, less applicable tax withholdings. The number of net option shares is calculated by subtracting from the total number of shares of Rockwell Collins common stock subject to such stock option a number of shares of Rockwell Collins common stock with a value equal to the aggregate applicable exercise price.

Treatment of Deferred Stock Unit Awards

Upon completion of the merger, each then-outstanding stock unit credited to participant accounts under the Rockwell Collins Non-Qualified Savings Plan, the Amended and Restated Rockwell Collins 2005

 

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Non-Qualified Retirement Savings Plan or the B/E Aerospace, Inc. 2010 Deferred Compensation Plan, as assumed by Rockwell Collins, that relates to shares of Rockwell Collins common stock, referred to as a DSU award, that is payable in cash by its terms upon the completion of the merger will be canceled in exchange for the right to receive a lump sum cash payment equal to the product of the value of the merger consideration and the number of shares of Rockwell Collins common stock relating to such DSU award, less applicable tax withholding. For this purpose, the value of the portion of the merger consideration that consists of shares of UTC common stock will be equal to the product of the number of such shares of UTC common stock and the UTC stock price.

Upon completion of the merger, each then-outstanding DSU award that is payable in shares of Rockwell Collins common stock by its terms upon the completion of the merger will be canceled in exchange for the right to receive the merger consideration in respect of each share of Rockwell Collins common stock relating to such DSU award, less applicable tax withholding.

Upon completion of the merger, each then-outstanding DSU award that is not payable by its terms upon the completion of the merger will be assumed by UTC and converted into a deferred stock unit award of UTC covering a number of shares of UTC common stock (rounded down to the nearest whole number of shares) equal to the product obtained by multiplying (1) the number of shares of Rockwell Collins common stock subject to the DSU award by (2) the equity award exchange ratio. Each deferred stock unit award of UTC received in such conversion will be settled in cash or shares of UTC common stock as provided in the applicable plan document on the date or dates provided under the applicable election.

 

  Q: Whom should I contact if I have any questions about the proxy materials or voting?

 

  A: If you have any questions about the proxy materials, or if you need assistance submitting your proxy or voting your shares or need additional copies of this proxy statement/prospectus or the enclosed proxy card, you should contact Innisfree M&A Incorporated, the proxy solicitation agent for Rockwell Collins, at (877) 825-8772 or (212) 750-5833 (bankers and brokers call collect).

 

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SUMMARY

This summary highlights selected information contained in this proxy statement/prospectus and does not contain all the information that may be important to you. UTC and Rockwell Collins urge you to read carefully this proxy statement/prospectus in its entirety, including the annexes. Additional, important information, which UTC and Rockwell Collins also urge you to read, is contained in the documents incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 174. All references in this proxy statement/prospectus to UTC refer to United Technologies Corporation, a Delaware corporation, and/or its consolidated subsidiaries, unless the context requires otherwise, all references to Rockwell Collins refer to Rockwell Collins, Inc., a Delaware corporation, and/or its consolidated subsidiaries, unless the context requires otherwise, and all references to the merger agreement are to the Agreement and Plan of Merger, dated as of September 4, 2017, by and among United Technologies Corporation, Riveter Merger Sub Corp. and Rockwell Collins, Inc., as it may be amended, a copy of which is attached as Annex  A to this proxy statement/prospectus.

The Parties

UTC

UTC provides high technology products and services to the building systems and aerospace industries worldwide. UTC conducts its business through four principal segments: Otis, UTC Climate, Controls & Security, Pratt & Whitney and UTC Aerospace Systems. Each segment groups similar operating companies, and the management organization of each segment has general operating autonomy over a range of products and services. Otis and UTC Climate, Controls & Security (collectively referred to as the “commercial businesses”) serve customers in the commercial, government, infrastructure and residential property sectors and transport and refrigeration businesses worldwide. Pratt & Whitney and UTC Aerospace Systems (collectively referred to as the “aerospace businesses”) primarily serve commercial and government customers in both the original equipment and aftermarket parts and services markets of the aerospace industry. The principal products and services of each segment are as follows:

 

    Otis —Otis is an elevator and escalator manufacturing, installation and service company and designs, manufactures, sells and installs passenger and freight elevators for low-, medium- and high-speed applications, as well as a broad line of escalators and moving walkways. In addition to new equipment, Otis provides modernization products to upgrade elevators and escalators as well as maintenance and repair services for both its products and those of other manufacturers. Otis serves customers in the commercial and residential property industries around the world.

 

    UTC Climate, Controls  & Security —UTC Climate, Controls & Security is a provider of heating, ventilating, air conditioning (HVAC) and refrigeration solutions, including controls for residential, commercial, industrial and transportation applications. These products and services are sold to building contractors and owners, homeowners, transportation companies, retail stores and food service companies. UTC Climate, Controls & Security is also a global provider of security and fire safety products and services. In certain markets, UTC Climate, Controls & Security also provides monitoring and response services, to complement its electronic security and fire safety businesses. UTC Climate, Controls & Security products and services are used by governments, financial institutions, architects, building owners and developers, security and fire consultants, homeowners and other end-users requiring a high level of security and fire protection for their businesses and residences.

 

   

Pratt  & Whitney —Pratt & Whitney supplies aircraft engines for the commercial, military, business jet and general aviation markets. Pratt & Whitney also provides fleet management services and aftermarket maintenance, repair and overhaul services, including the sale of spare parts and auxiliary power units. Pratt & Whitney produces and develops families of large engines for wide- and narrow-

 



 

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body and large regional aircraft in the commercial market and for fighter, bomber, tanker and transport aircraft in the military market. Pratt & Whitney’s products are sold principally to aircraft manufacturers, airlines and other aircraft operators, aircraft leasing companies and the U.S. and foreign governments.

 

    UTC Aerospace Systems —UTC Aerospace Systems is a global provider of technologically advanced aerospace products and aftermarket service solutions for aircraft manufacturers, airlines, regional, business and general aviation markets, military, space and undersea operations. UTC Aerospace Systems sells aerospace products to aircraft manufacturers, airlines and other aircraft operators, the U.S. and foreign governments, maintenance, repair and overhaul providers, and independent distributors.

For 2016, UTC’s commercial and industrial sales (generated principally by the commercial businesses) were approximately 50% of its consolidated sales, and its commercial aerospace sales and military aerospace sales (generated exclusively by its aerospace businesses) were approximately 38% and 12%, respectively, of its consolidated sales. International sales for 2016, including U.S. export sales, were 61% of its total segment sales.

UTC’s principal executive offices are located at 10 Farm Springs Road, Farmington, Connecticut 06032, and its telephone number is (860) 728-7000. UTC’s website address is www.utc.com. Information contained on UTC’s website does not constitute part of this proxy statement/prospectus. UTC’s stock is publicly traded on the NYSE, under the ticker symbol “UTX.” Additional information about UTC is included in documents incorporated by reference in this proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 174.

Rockwell Collins

Rockwell Collins supplies cabin interior products and services to aircraft manufacturers and airlines, designs, produces and supports communications and aviation systems for commercial and military customers and provides information management services through voice and data communication networks and solutions worldwide. The integrated system solutions and products Rockwell Collins provides to its served markets are oriented around a set of core competencies: communications, navigation, automated flight control, displays/surveillance, simulation and training, integrated electronics and information management systems. Rockwell Collins also provides a wide range of services and support to its customers through a worldwide network of service centers, including equipment repair and overhaul, service parts, field service engineering, training, technical information services and aftermarket used equipment sales. The structure of Rockwell Collins’ business allows it to leverage these core competencies across markets and applications to bring high value solutions to its customers.

Rockwell Collins serves a worldwide customer base through its four operating segments: Interior Systems, Commercial Systems, Government Systems and Information Management Services. The Interior Systems business manufactures cabin interior products for the commercial aircraft and business aviation markets. The customer base consists of virtually all of the world’s major airlines and aerospace manufacturers. The Commercial Systems segment supplies aviation electronics systems, products and services, as well as aircraft cabin interior products, to customers located throughout the world. The customer base consists of original equipment manufacturers of commercial air transport, business and regional aircraft, commercial airlines and business aircraft operators. The Government Systems segment provides a broad range of electronic products, systems and services to customers including the U.S. Department of Defense, various ministries of defense, other government agencies and defense contractors around the world. These products, systems and services support airborne, precision weapon, ground and maritime applications on new equipment as well as in retrofit and upgrade applications designed to extend the service life and enhance the capability of existing aircraft, vehicle

 



 

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and weapon platforms. The Information Management Services segment provides communications services, systems integration and security solutions across the aviation, airport, rail and nuclear security markets to customers located around the world. The customer base includes commercial airlines, business aircraft operators, the U.S. Federal Aviation Administration (FAA), airport and critical infrastructure operators and major passenger and freight railroads.

Rockwell Collins serves a broad range of customers worldwide, including the U.S. Department of Defense, U.S. Coast Guard, civil agencies, airports, defense contractors, foreign ministries of defense, manufacturers of commercial helicopters, manufacturers of commercial air transport, business and regional aircraft, commercial airlines, fractional and other business jet operators, the FAA, critical infrastructure operators and major passenger and freight railroads. Rockwell Collins markets its systems, products and services directly to its customers through an internal marketing and sales force. In addition, it utilizes a worldwide dealer network to distribute its products and international sales representatives to assist with international sales and marketing. In 2016, various branches of the U.S. Government, both directly and indirectly through subcontracts, accounted for 33% of Rockwell Collins’ total sales.

Rockwell Collins’ executive offices are located at 400 Collins Road N.E., Cedar Rapids, Iowa 52498, and its telephone number is (319) 295-1000. Rockwell Collins’ website address is www.rockwellcollins.com. Information contained on Rockwell Collins’ website does not constitute part of this proxy statement/prospectus. Rockwell Collins’ stock is publicly traded on the NYSE, under the ticker symbol “COL.” Additional information about Rockwell Collins is included in documents incorporated by reference in this proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 174.

Riveter Merger Sub Corp.

Riveter Merger Sub Corp., a wholly owned subsidiary of UTC, is a Delaware corporation incorporated on August 30, 2017 for the purpose of effecting the merger. Riveter Merger Sub Corp. has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement. The principal executive offices of Riveter Merger Sub Corp. are located at 10 Farm Springs Road, Farmington, Connecticut 06032, and its telephone number is (860) 728-7000.

The Merger

A summary of the terms and conditions of the merger are contained in the merger agreement, a copy of which is attached as Annex A to this proxy statement/prospectus. We encourage you to read the merger agreement carefully and in its entirety, as it is the legal document that governs the merger.

On September 4, 2017, UTC, Rockwell Collins and Merger Sub entered into the merger agreement, which provides that, subject to the terms and conditions of the merger agreement and in accordance with the DGCL, Merger Sub will merge with and into Rockwell Collins, with Rockwell Collins continuing as the surviving corporation and a wholly owned subsidiary of UTC.

Merger Consideration

At the completion of the merger, each share of Rockwell Collins common stock that is issued and outstanding immediately prior to the completion of the merger (other than (1) shares held by Rockwell Collins as treasury stock, UTC, or any subsidiaries of Rockwell Collins or UTC and (2) shares held by a holder who has properly exercised and perfected (and not effectively withdrawn or lost) such holder’s demand for appraisal rights under the DGCL, both of which are collectively referred to herein as excluded shares) will be converted into the right to receive (a) $93.33 in cash, without interest, which is referred to as the cash consideration, plus

 



 

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(b) a fraction of a share of UTC common stock equal to the quotient obtained by dividing $46.67 by the average of the volume-weighted average prices per share of UTC common stock on each of the 20 consecutive trading days ending with the trading day immediately prior to the closing date (which is referred to as the UTC stock price), subject to adjustment based on a two-way collar mechanism described below, which is referred to as the stock consideration. The cash and UTC stock payable in exchange for each such share of Rockwell Collins common stock are collectively referred to as the merger consideration. The fraction of a share of UTC common stock into which each such share of Rockwell Collins common stock will be converted is referred to as the exchange ratio. The exchange ratio will be determined based upon the UTC stock price. If the UTC stock price is greater than $107.01 but less than $124.37, the exchange ratio will be equal to the quotient of (i) $46.67 divided by (ii) the UTC stock price, which, in each case, will result in the stock consideration having a value equal to $46.67. If the UTC stock price is less than or equal to $107.01 or greater than or equal to $124.37, then a two-way collar mechanism will apply, pursuant to which, (x) if the UTC stock price is greater than or equal to $124.37, the exchange ratio will be fixed at 0.37525 and the value of the stock consideration will be greater than $46.67, and (y) if the UTC stock price is less than or equal to $107.01, the exchange ratio will be fixed at 0.43613 and the value of the stock consideration will be less than $46.67. Upon the completion of the merger, based on minimum and maximum exchange ratios of 0.37525 and 0.43613, the estimated number of shares of UTC common stock issuable as a portion of the merger consideration is between 62 million shares and 72 million shares, which will result in former Rockwell Collins shareowners holding approximately 7% to 8% of the outstanding fully diluted UTC common stock, based on the number of outstanding shares of common stock and outstanding stock-based awards of Rockwell Collins and UTC as of November 30, 2017. For more details on the shares of UTC common stock and other consideration to be received by Rockwell Collins shareowners, see “The Merger Agreement—Merger Consideration” beginning on page 101.

All fractional shares of UTC common stock that would otherwise be issued to a Rockwell Collins shareowner of record as part of the merger consideration will be aggregated to create whole shares of UTC common stock that will be issued to Rockwell Collins shareowners of record as part of the merger consideration. If a fractional share of UTC common stock remains payable to a Rockwell Collins shareowner after aggregating all fractional shares of UTC common stock payable to such shareowner, then such shareowner will be paid, in lieu of such remaining fractional share of UTC common stock, an amount in cash, without interest, rounded down to the nearest cent, equal to the product of (1) the amount of the fractional share interest in a share of UTC common stock to which such holder would otherwise be entitled (rounded to three decimal places) and (2) the UTC stock price.

Treatment of Equity Awards

Treatment of Restricted Stock Awards

Upon completion of the merger, each then-outstanding restricted stock award will become fully vested and will be canceled and converted into the right to receive the merger consideration in respect of each share of Rockwell Collins common stock subject to such restricted stock award, i.e. , treated in the same manner as all other outstanding shares of Rockwell Collins common stock (other than excluded shares) for such purposes.

Treatment of Restricted Stock Unit Awards

Upon completion of the merger, each then-outstanding RSU award that was granted (1) prior to September 4, 2017 or (2) to a non-employee director of Rockwell Collins will become fully vested and will be canceled in exchange for the right to receive the merger consideration in respect of each share of Rockwell Collins common stock subject to such RSU award (with the number of shares subject to any performance-based RSU award deemed to be equal to the target number of shares subject to such award), less applicable tax withholdings.

 



 

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Upon completion of the merger, each then-outstanding RSU award granted on or after September 4, 2017 (except for RSU awards granted to non-employee directors) will be assumed by UTC and converted into a time-based restricted stock unit award of UTC covering a number of shares of UTC common stock (rounded down to the nearest whole number of shares) equal to the product obtained by multiplying (1) the number of shares of Rockwell Collins common stock subject to the RSU award (with the number of shares subject to any performance-based RSU award deemed to be equal to the target number of shares subject to such award) by (2) the equity award exchange ratio. The equity award exchange ratio is a number of shares of UTC common stock equal to the sum of (a) the exchange ratio and (b) the quotient (rounded to four decimal places) obtained by dividing the cash consideration by the UTC stock price. Each restricted stock unit award of UTC received in such conversion will be subject to the vesting schedule applicable to the corresponding RSU award and will be settled as provided in the award agreement applicable to corresponding RSU award, subject only to the continued service of the grantee with UTC or the surviving corporation through each applicable vesting date (except in the event of an earlier qualifying termination of service) but will not be subject to any performance conditions following the completion of the merger.

Treatment of Stock Options

Upon completion of the merger, each then-outstanding stock option will be canceled in exchange for the right to receive the merger consideration in respect of each net option share subject to such stock option, less applicable tax withholdings. The number of net option shares is calculated by subtracting from the total number of shares of Rockwell Collins common stock subject to such stock option a number of shares of Rockwell Collins common stock with a value equal to the aggregate applicable exercise price.

Treatment of Deferred Stock Unit Awards

Upon completion of the merger, each then-outstanding DSU award that is payable in cash by its terms upon the completion of the merger will be canceled in exchange for the right to receive a lump sum cash payment equal to the product of the value of the merger consideration and the number of shares of Rockwell Collins common stock relating to such DSU award, less applicable tax withholding. For this purpose, the value of the portion of the merger consideration that consists of shares of UTC common stock will be equal to the product of the number of such shares of UTC common stock and the UTC stock price.

Upon completion of the merger, each then-outstanding DSU award that is payable in shares of Rockwell Collins common stock by its terms upon the completion of the merger will be canceled in exchange for the right to receive the merger consideration in respect of each share of Rockwell Collins common stock relating to such DSU award, less applicable tax withholding.

Upon completion of the merger, each then-outstanding DSU award that is not payable by its terms upon the completion of the merger will be assumed by UTC and converted into a deferred stock unit award of UTC covering a number of shares of UTC common stock (rounded down to the nearest whole number of shares) equal to the product obtained by multiplying (1) the number of shares of Rockwell Collins common stock subject to the DSU award by (2) the equity award exchange ratio. Each deferred stock unit award of UTC received in such conversion will be settled in cash or shares of UTC common stock as provided in the applicable plan document on the date or dates provided under the applicable election.

Financing of the Merger and Treatment of Existing Debt

In connection with the merger, UTC currently intends to maintain Rockwell Collins’ existing revolving credit facility, term loan facility and outstanding notes. UTC is expected to assume approximately $7.2 billion of Rockwell Collins’ outstanding debt.

 



 

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UTC’s obligation to complete the merger is not conditioned upon its obtaining financing. UTC anticipates that approximately $15 billion will be required to pay the aggregate cash portion of the merger consideration to the Rockwell Collins shareowners and to pay fees and expenses relating to the merger. UTC intends to fund the cash component of the merger through sources of debt financing and cash on hand. In connection with entering into the merger agreement, UTC entered into a commitment letter, dated as of September 4, 2017, with Morgan Stanley Senior Funding, Inc., Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, HSBC Bank USA, National Association and HSBC Securities (USA) Inc., that provided a one-year commitment, subject to an extension to eighteen months under certain circumstances, for a $6.5 billion 364-day unsecured bridge loan facility. On October 6, 2017, in accordance with, and consistent with the terms set forth in, the commitment letter, UTC entered into a $6.5 billion 364-day unsecured bridge loan credit agreement, with the lenders party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent. The commitments under the bridge credit agreement terminate on September 4, 2018 or, under certain circumstances, on March 4, 2019.

For a more complete description of sources of funding for the merger, see “The Merger—Financing of the Merger and Treatment of Existing Debt” beginning on page  94.

Recommendation of the Rockwell Collins Board of Directors

After careful consideration of various factors described in “The Merger—Rockwell Collins Board of Directors’ Recommendations and Reasons for the Merger” beginning on page 61, the Rockwell Collins Board unanimously recommends that holders of common stock vote:

 

    “FOR” the merger proposal;

 

    “FOR” the merger-related compensation proposal; and

 

    “FOR” the adjournment proposal.

Opinions of Rockwell Collins’ Financial Advisors

Opinion of J.P. Morgan Securities LLC

Rockwell Collins retained J.P. Morgan Securities LLC, which is referred to as J.P. Morgan, to act as its financial advisor in connection with the proposed merger. At the meeting of the Rockwell Collins Board on September 4, 2017, J.P. Morgan rendered its oral opinion to the Rockwell Collins Board that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, each as described in greater detail in the section entitled “The Merger—Opinions of Rockwell Collins’ Financial Advisors” beginning on page 66, the consideration to be paid to the holders of Rockwell Collins common stock (other than excluded shares) in the proposed merger was fair, from a financial point of view, to such holders. The oral opinion was subsequently confirmed in writing by delivery of J.P. Morgan’s written opinion dated September 4, 2017.

The full text of the written opinion of J.P. Morgan, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement/prospectus and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. Rockwell Collins shareowners are urged to read the opinion in its entirety. J.P. Morgan’s opinion was addressed to the Rockwell Collins Board (in its capacity as such) in connection with and for the purposes of its evaluation of the merger, was directed only to the consideration to be paid in the merger and did not address any other aspect of the merger. J.P. Morgan expressed no opinion as to the fairness of the consideration to the holders of any other class of securities, creditors or other constituencies of Rockwell Collins or as to the underlying decision by Rockwell Collins to engage in the merger. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan.

 



 

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The opinion does not constitute a recommendation to any shareowner of Rockwell Collins as to how such shareowner should vote with respect to the merger or any other matter.

Opinion of Citigroup Global Markets Inc.

On September 4, 2017, Citigroup Global Markets Inc., which is referred to as Citigroup, delivered to the Rockwell Collins Board a written opinion dated September 4, 2017, to the effect that, as of such date and based on and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications set forth in the written opinion, each as described in greater detail in the section entitled “The Merger—Opinions of Rockwell Collins’ Financial Advisors” beginning on page 66, the consideration to be received by the holders of Rockwell Collins common stock (other than excluded shares) in the proposed merger was fair, from a financial point of view, to such holders. Citigroup’s opinion, the issuance of which was authorized by Citigroup’s fairness opinion committee, was provided to the Rockwell Collins Board (in its capacity as such) in connection with its evaluation of the merger and was limited to the fairness, from a financial point of view, as of the date of Citigroup’s opinion, to the holders of outstanding shares of common stock of Rockwell Collins (other than excluded shares) of the merger consideration to be received by such holders in the merger.

Citigroup’s opinion does not address any other aspects or implications of the merger and does not constitute a recommendation to any shareowners as to how such shareowner should vote or act on any matters relating to the merger or otherwise. The summary of Citigroup’s opinion contained in this proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion. We encourage you to read the full text of Citigroup’s written opinion, which is attached to this proxy statement/prospectus as Annex C and sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications on the scope of review undertaken.

Interests of Rockwell Collins’ Directors and Executive Officers in the Merger

The directors and executive officers of Rockwell Collins have interests in the merger that are different from, or in addition to, their interests as shareowners of Rockwell Collins generally. The Rockwell Collins Board was aware of these interests prior to the execution of the merger agreement and considered them, among other matters, in approving the merger agreement and in determining to recommend that the shareowners adopt the merger agreement. Additional interests of the directors and executive officers of Rockwell Collins in the merger include, but are not limited to:

 

    the vesting and cancellation in exchange for the right to receive the merger consideration of 222,411 RSU awards held by the non-employee directors and 137,608 RSU awards (at target levels) held by the executive officers of Rockwell Collins with an aggregate estimated value of $29,120,273 and $18,017,015, respectively;

 

    the conversion into UTC restricted stock unit awards of 131,224 RSU awards (at target levels) held by the executive officers of Rockwell Collins with an aggregate estimated value of $17,181,158;

 

    the vesting and cancellation in exchange for the right to receive the merger consideration of 352,410 unvested stock options held by the executive officers of Rockwell Collins with an aggregate estimated value of $15,076,029;

 

    the vesting and cancellation in exchange for the right to receive the merger consideration of 23,029 restricted stock awards held by the non-employee directors of Rockwell Collins with an aggregate estimated value of $3,015,187;

 

    the cancellation in exchange for the right to receive the merger consideration, or the cash value of the merger consideration, as the case may be, of 24,194 vested DSU awards held by the executive officers of Rockwell Collins that are payable by their terms upon completion of the merger with an aggregate estimated value of $3,167,720;

 



 

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    the conversion into UTC deferred stock unit awards of 111 vested DSU awards held by the executive officers of Rockwell Collins that are not payable by their terms upon completion of the merger with an aggregate estimated value of $14,534;

 

    the payment of certain severance payments and other benefits that the executive officers of Rockwell Collins are, by reason of their respective change of control agreements with Rockwell Collins, entitled to receive upon a qualifying termination of employment following the completion of the merger, with an aggregate estimated value of $40,739,852;

 

    the payment of prorated target bonuses to executive officers of Rockwell Collins, with an aggregate estimated value of $1,065,679;

 

    the payment of retention bonuses to two executive officers of Rockwell Collins that will vest and be paid in two equal installments on the date of the completion of the merger and the date that is 12 months following the date of the completion of the merger, with an aggregate value of $565,000;

 

    the payment of an additional early retirement subsidy under the Rockwell Collins 2005 Non-Qualified Pension Plan to five executive officers of Rockwell Collins with an aggregate estimated value of $64,000;

 

    the continued employment of certain executive officers of Rockwell Collins with the surviving corporation following the completion of the merger, including the designation of Robert K. Ortberg, Chairman, President and Chief Executive Officer of Rockwell Collins, as the chief executive officer of the combined aerospace systems business of UTC and Rockwell Collins; and

 

    the provision of indemnification and insurance for current and former directors and executive officers.

The estimated values set forth above were calculated assuming that the completion of the merger occurred on November 30, 2017, the last practicable date before the filing of this proxy statement/prospectus. For these purposes, the value of each share of common stock subject to an outstanding Rockwell Collins equity award is assumed to be equal to $130.93, which was Rockwell Collins’ average per share closing market price over the first five business days following the first public announcement of the merger on September 4, 2017.

For a more complete description of the interests in the merger of the directors and executive officers of Rockwell Collins that are different from, or in addition to, those of Rockwell Collins shareowners generally, see “The Merger—Interests of Directors and Executive Officers of Rockwell Collins in the Merger” beginning on page 84.

Information about the Rockwell Collins Shareowners’ Meeting

Time, Place and Purpose of the Special Meeting

The special meeting to consider and vote upon the adoption of the merger agreement and related matters, which is referred to as the special meeting, will be held at The Cedar Rapids Marriott, 1200 Collins Road N.E., Cedar Rapids, Iowa on [            ], at 8:30 a.m. (Central Time).

At the special meeting, the shareowners will be asked to consider and vote upon (1) the merger proposal, (2) the merger-related compensation proposal and (3) the adjournment proposal.

Record Date and Quorum

You are entitled to receive notice of, and to vote at, the special meeting if you are an owner of record of shares of Rockwell Collins common stock as of the close of business on [            ], the record date. On the record date, there were [            ] shares of Rockwell Collins common stock outstanding and entitled to vote, including a

 



 

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total of [            ] shares held in the Rockwell Collins Retirement Savings Plan and the B/E Aerospace, Inc. Savings Plan. Shareowners will have one vote on all matters properly coming before the special meeting for each share of common stock owned by such shareowners on the record date.

The presence at the special meeting, in person or by proxy, of the holders of a majority of the shares of common stock issued and outstanding on the record date for the special meeting will constitute a quorum for the transaction of business at the special meeting.

Vote Required

The merger proposal requires the affirmative vote of the holders of a majority of the shares of Rockwell Collins common stock outstanding and entitled to vote (in person or by proxy) at the special meeting. If a Rockwell Collins shareowner present in person at the special meeting abstains from voting, responds by proxy with an “abstain” vote, is not present in person at the special meeting and does not respond by proxy or does not provide their bank, brokerage firm or other nominee with instructions, as applicable, it will have the effect of a vote cast “AGAINST” such proposal.

The merger-related compensation proposal requires the affirmative vote of holders of a majority of the shares of Rockwell Collins common stock represented (in person or by proxy) at the special meeting and entitled to vote on the proposal, assuming a quorum. If a Rockwell Collins shareowner present in person at the special meeting abstains from voting, or responds by proxy with an “abstain” vote, it will have the same effect as a vote cast “AGAINST” for such proposal. If a shareowner is not present in person at the special meeting and does not respond by proxy or does not provide their bank, brokerage firm or other nominee with instructions, as applicable, it will have no effect on the vote count for such proposal.

The adjournment proposal requires the affirmative vote of holders of a majority of the shares of Rockwell Collins common stock represented (in person or by proxy) at the special meeting and entitled to vote on the proposal, regardless of whether a quorum is present. If a Rockwell Collins shareowner present in person at the special meeting abstains from voting, or responds by proxy with an “abstain” vote, it will have the same effect as a vote cast “AGAINST” for such proposal. If a shareowner is not present in person at the special meeting and does not respond by proxy or does not provide their bank, brokerage firm or other nominee with instructions, as applicable, it will have no effect on the vote count for such proposal.

Proxies and Revocations

Any shareowner of record entitled to vote at the special meeting may submit a proxy by telephone, over the Internet, by returning the enclosed proxy card in the accompanying prepaid reply envelope or may vote in person by appearing at the special meeting. If your shares of common stock are held in “street name” through a bank, brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your shares of common stock using the instructions provided by your bank, brokerage firm or other nominee. If shares of common stock are allocated to your account under the Rockwell Collins Retirement Savings Plan and you receive email instructions on how to direct the plan trustee to vote the shares allocated to your account under the plan, you should submit your direction in accordance with the email instructions. If (A) shares of common stock are allocated to your account under the Rockwell Collins Retirement Savings Plan and you are not an employee, or you are an employee and do not have regular computer access as an integral part of your job duties, or (B) shares of common stock are allocated to your account under the B/E Aerospace, Inc. Savings Plan, you may direct the trustee on how to vote such shares by telephone, over the Internet or by returning the enclosed voting direction card in the accompanying prepaid reply envelope.

If you are a record holder, you may change or revoke your vote before your proxy is voted at the special meeting as described herein. You may do this in one of the following four ways: (1) by logging onto the Internet

 



 

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website specified on your proxy card in the same manner you would to submit your proxy electronically or by calling the telephone number specified on your proxy card, in each case, if you are eligible to do so; (2) by sending a notice of revocation to the corporate secretary of Rockwell Collins; (3) by sending a completed proxy card bearing a later date than your original proxy card; or (4) by attending the special meeting and voting in person. If you choose any of the first three methods, you must take the described action no later than the beginning of the special meeting. If shares are allocated to your account under the Rockwell Collins Retirement Savings Plan and you have directed the plan trustee on how to vote such shares pursuant to email instruction, you should take the same actions detailed in these email instructions on how to direct the plan trustee to vote to change or revoke such direction. If shares are allocated to your account under the Rockwell Collins Retirement Savings Plan or the B/E Aerospace, Inc. Savings Plan and you have directed the plan trustee on how to vote such shares by telephone, via the Internet, or by mail, you may change or revoke such direction via methods (1), (2) or (3) above, but in any case you must change your vote prior to 11:59 p.m. (Central Time) on [            ] (for shares voted by telephone or Internet) or 6:00 a.m. (Central Time) on [            ] (for shares voted by mail).

Voting by Rockwell Collins Directors and Executive Officers

As of the close of business on November 30, 2017, the most recent practicable date for which such information was available, directors and executive officers of Rockwell Collins and their affiliates owned and were entitled to vote 426,128 shares of Rockwell Collins common stock, or less than 1% of the shares of common stock outstanding on that date. The number and percentage of shares of Rockwell Collins common stock owned by directors and executive officers of Rockwell Collins and their affiliates as of the record date are not expected to be meaningfully different from the number and percentage as of November 30, 2017. It is currently expected that Rockwell Collins’ directors and executive officers will vote their shares of common stock in favor of each of the proposals to be considered at the special meeting, although none of them have entered into any agreements obligating them to do so. The number of shares reflected above does not include shares subject to outstanding restricted stock awards or shares underlying outstanding RSU awards, stock options or DSU awards. For information with respect to restricted stock awards, RSU awards, stock options and DSU awards, please see “The Merger Agreement—Treatment of Equity Awards—Treatment of Restricted Stock Awards;—Treatment of Restricted Stock Unit Awards;—Treatment of Stock Options; and—Treatment of Deferred Stock Unit Awards” beginning on pages 103, 103, 103 and 104, respectively.

Regulatory Approvals

Under the HSR Act and related rules, certain transactions, including the merger, may not be completed until notifications have been given and information furnished to the Antitrust Division of the United States Department of Justice, which is referred to as the Antitrust Division, and the United States Federal Trade Commission, which is referred to as the FTC, and all statutory waiting period requirements have been satisfied. Completion of the merger is subject to the expiration or earlier termination of the applicable waiting period under the HSR Act without the imposition of an unacceptable condition. UTC and Rockwell Collins each filed their respective HSR Act notification forms on September 28, 2017. On October 30, 2017, UTC and Rockwell Collins each received a request for additional information and documentary material, often referred to as a “second request,” from the Antitrust Division under the HSR Act.

Completion of the merger is further subject to notification or receipt of certain other regulatory approvals, including notification, clearance and/or approval in the European Union and certain other foreign jurisdictions, in each case without the imposition, individually or in the aggregate, of an unacceptable condition.

There can be no assurance that a challenge to the merger on antitrust or other grounds will not be made or, if such a challenge is made, that it would not be successful.

See “The Merger—Regulatory Approvals” beginning on page 95.

 



 

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Litigation Relating to the Merger

In connection with the merger, several lawsuits have been filed by purported Rockwell Collins shareowners. The lawsuits allege, among other things, that the Registration Statement on Form S-4 filed by UTC on October 10, 2017 misstates and/or omits material information. The lawsuits seek an injunction barring the merger, rescission of the merger in the event it has been consummated, recovery of damages and other relief. For a more detailed description of litigation in connection with the merger, see “The Merger—Litigation Relating to the Merger” beginning on page 100.

Conditions to Completion of the Merger

In addition to the approval of the merger proposal by Rockwell Collins shareowners, the expiration or termination of the applicable waiting period under the HSR Act and the approval of regulatory authorities in the European Union, Brazil, Canada, China, Japan, the Philippines, Russia, South Korea, Taiwan and Turkey and under the foreign investment laws of France, relating to the merger, in each case without the imposition, individually or in the aggregate, of an unacceptable condition, each party’s obligation to complete the merger is also subject to the satisfaction or waiver (to the extent permitted under applicable law) of certain other conditions, including the effectiveness of the registration statement on Form S-4 of which this proxy statement/prospectus forms a part (and the absence of any stop order, or pending proceedings seeking a stop order, by the SEC), approval of the listing on the NYSE of the UTC common stock to be used for a portion of the merger consideration, the absence of an injunction or law prohibiting the merger or issuance of the UTC common stock to be used for a portion of the merger consideration or resulting, individually or in the aggregate, in an unacceptable condition, the accuracy of the representations and warranties of the parties under the merger agreement (subject to the materiality standards set forth in the merger agreement), the performance by the parties of their respective covenants and obligations under the merger agreement in all material respects and delivery of officer certificates by the parties certifying satisfaction of certain of the conditions described above.

The parties expect to complete the merger after all of the conditions to the merger in the merger agreement are satisfied or waived, including after Rockwell Collins receives shareowner approval of the merger proposal at the special meeting and after Rockwell Collins and UTC receive all required regulatory approvals. For a more complete description of the conditions to the merger, see “The Merger Agreement—Conditions to the Merger” beginning on page 120.

Timing of the Merger

The parties expect the transaction to be completed by the third quarter of calendar year 2018. Neither UTC nor Rockwell Collins can predict, however, the actual date on which the transaction will be completed because it is subject to conditions beyond each company’s control, including obtaining the necessary regulatory approvals. For a more complete description of the conditions to the merger, see “The Merger Agreement—Conditions to the Merger” beginning on page  120.

No Solicitation

As more fully described in this proxy statement/prospectus and in the merger agreement, and subject to the exceptions summarized below, Rockwell Collins has agreed that (1) it, its subsidiaries and its and their respective officers and directors will and will use reasonable best efforts to cause its and their respective other representatives to immediately cease and terminate all existing discussions, negotiations and communications with any persons or entities with respect to acquisition proposals involving Rockwell Collins, including proposals to acquire 20% or more of Rockwell Collins’ voting power, consolidated assets, revenues or net income; (2) Rockwell Collins will not, and will not authorize, and will use its reasonable best efforts not to

 



 

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permit any of its representatives to, directly or indirectly initiate, seek, solicit, knowingly facilitate, knowingly encourage or knowingly induce or knowingly take any other action reasonably expected to lead to an acquisition proposal, engage in negotiations or discussions with, or provide any non-public information or non-public data to, any person or entity relating to or for the purpose of encouraging or facilitating an acquisition proposal or grant any waiver or release under any standstill, confidentiality or other similar agreement (unless the Rockwell Collins Board determines in good faith that the failure to grant such waiver or release would be inconsistent with its fiduciary duties under applicable law); (3) Rockwell Collins will not provide access (and will terminate any such access) to any third party to any data room containing any of the information of Rockwell Collins or any of its subsidiaries; and (4) Rockwell Collins will demand the return or destruction of all confidential, non-public information and materials that have been provided to third parties that have entered into confidentiality agreements relating to a possible acquisition proposal with Rockwell Collins or any of its subsidiaries.

The merger agreement includes certain exceptions to the non-solicitation covenant such that, prior to obtaining the shareowner approval, Rockwell Collins may participate in discussions and negotiations concerning an unsolicited acquisition proposal if the Rockwell Collins Board determines in good faith, after consultation with outside financial advisors and outside legal counsel, that the acquisition proposal is or will reasonably likely be or result in a “superior proposal” (as defined in the merger agreement). Also, the Rockwell Collins Board may, subject to complying with certain specified procedures, including providing UTC with a good faith opportunity to negotiate and, in certain circumstances, payment of a termination fee as described below, (1) change its recommendation in favor of the merger and the transactions contemplated by the merger agreement, or terminate the merger agreement in order to enter into a definitive agreement regarding an unsolicited acquisition proposal that is determined to be a superior proposal, or (2) change its recommendation in favor of the merger and the transactions contemplated by the merger agreement in response to an “intervening event” (as defined in the merger agreement) that becomes known after the date of the merger agreement but prior to the Rockwell Collins shareowner approval, in each case, to the extent failure to do so would be inconsistent with its fiduciary duties under applicable law.

For a more complete description of the limitations on solicitation of acquisition proposals from third parties and the ability of the Rockwell Collins Board to change its recommendation for the transaction, see “The Merger Agreement—Covenants and Agreements—No Solicitation” beginning on page 114.

Termination of the Merger Agreement; Termination Fee

The merger agreement may be terminated by mutual written consent of UTC and Rockwell Collins at any time prior to the closing. In addition, the merger agreement may be terminated as follows:

 

    by either UTC or Rockwell Collins if:

 

    the merger has not been completed on or before 5:00 p.m. (New York time) on September 4, 2018 (subject to extension through March 4, 2019, if all conditions other than certain antitrust-related conditions are or would be satisfied as of such date), which is referred to as the termination date, except where the party seeking to terminate this agreement for this reason has committed a material breach of any of its obligations under the merger agreement and such material breach was the principal cause of or principally resulted in the failure of the completion of the merger on or before such date, which termination right is referred to as the end date termination right;

 

    any governmental authority has issued or entered any restraint that would permanently prohibit the completion of the merger, and the imposition of such restraint has become final and nonappealable, so long as the restraint was not principally due to a material breach by the terminating party;

 

    the shareowner approval has not been obtained at the special meeting or at any adjournment or postponement of such meeting; or

 



 

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    the other party breaches or fails to perform any of its representations, warranties, covenants or other agreements in the merger agreement, which breach or failure to perform would result in the failure of a condition related to the accuracy of the other party’s representations and warranties or performance of covenants in the merger agreement, subject to certain materiality thresholds and rights to cure and other limitations (this termination right is referred to as the breach termination right);

 

    by Rockwell Collins if prior to shareowner approval, Rockwell Collins enters into a definitive agreement with respect to a superior proposal, as described further in “The Merger Agreement—Covenants and Agreements—No Solicitation” beginning on page 114, provided that Rockwell Collins pays to UTC the termination fee; or

 

    by UTC if prior to shareowner approval, Rockwell Collins (1) makes an adverse recommendation change, as described further in “The Merger Agreement—Termination” beginning on page 122, (2) materially breaches certain non-solicitation obligations, or (3) fails to publicly reaffirm the Rockwell Collins Board’s recommendation for the merger within 10 business days of public announcement of certain competing acquisition proposals, or fails to recommend against an acquisition proposal in the form of a tender or exchange offer within 10 business days of commencement of such offer (this termination right is referred to as the recommendation change termination right).

If the merger agreement is terminated as described above, the merger agreement will be null and void and of no effect, without liability on the part of any party and each party’s rights and obligations will cease, subject to certain exceptions, including that:

 

    no termination will relieve any party of any liability or damages resulting from any intentional breach of its obligations under the merger agreement prior to such termination or fraud, in which case the aggrieved party will be entitled to all rights and remedies available at law or in equity, including liability for damages (taking into account all relevant factors, including the loss of benefit of the merger to the party, any lost shareowner premium, any lost synergies, the time value of money and any benefit to the breaching party or its shareowners arising from such intentional breach or fraud); and

 

    the confidentiality agreement entered into by UTC and Rockwell Collins in connection with entering into the merger and the provisions of the merger agreement with respect to certain indemnification obligations will survive any termination of the merger agreement.

The merger agreement provides for payment of a termination fee by Rockwell Collins to UTC of $695 million in connection with a termination of the merger agreement under the following circumstances:

 

    if (1) UTC terminates the merger agreement pursuant to the breach termination right or (2) either party terminates the merger agreement pursuant to the end date termination right or failure of Rockwell Collins to obtain the shareowner approval, and, in the case of either clause (1) or (2), after the execution of the merger agreement and prior to the termination, an acquisition proposal (with regard to 50% or more of the voting power, consolidated assets, revenues or net income of Rockwell Collins) is publicly disclosed or, in certain circumstances, otherwise made known to the Rockwell Collins Board and not withdrawn (publicly, if publicly disclosed) and Rockwell Collins consummates an acquisition proposal or enters into a definitive agreement with respect to any acquisition proposal within 12 months of the termination (regardless of when or whether such transaction is consummated);

 

    if Rockwell Collins terminates the merger agreement in order to enter into a definitive agreement with respect to a superior proposal; or

 

    if UTC terminates the merger agreement pursuant to the recommendation change termination right.

In no event will the termination fee will be payable more than once.

 



 

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If the merger agreement is terminated by UTC or Rockwell Collins due to failure of Rockwell Collins to obtain the shareowner approval, Rockwell Collins will pay UTC the reasonable and documented out-of-pocket costs and expenses incurred by UTC and Merger Sub (including all fees and expenses incurred in connection with financing of the transactions contemplated by the merger agreement and fees and expenses of counsel, accountants, investment bankers, experts and consultants incurred in connection with the merger agreement) in an amount not to exceed $50 million. Payment of the expense reimbursements by Rockwell Collins does not affect UTC’s right to receive any applicable termination fee, but will reduce on a dollar-for-dollar basis any termination fee that becomes payable.

UTC’s right to receive the termination fee and expense reimbursement, in circumstances in which the termination fee or expense reimbursement is payable and is paid in full, is the sole and exclusive monetary remedy of UTC against Rockwell Collins and its subsidiaries and representatives for all losses and damages suffered as a result of the failure of the transactions contemplated by the merger agreement to be completed or failure to perform under the merger agreement or otherwise, except (1) in the event of fraud or an intentional breach by Rockwell Collins, (2) for UTC’s right to receive the applicable termination fee less the applicable expense reimbursement under certain circumstances and (3) that if Rockwell Collins fails to timely pay any termination fee or expense reimbursement due, Rockwell Collins will be obligated to pay UTC its costs and expenses (including reasonable attorneys’ fees), together with interest, in connection with any suit brought by UTC that results in a judgment against Rockwell Collins for the payment of such termination fee and expense reimbursement.

For a more complete description of each party’s termination rights and the related termination fee obligations, see “The Merger Agreement—Termination” beginning on page 122 and “The Merger Agreement—Termination Fee and Expense Reimbursement” beginning on page 124.

Appraisal Rights of Rockwell Collins Shareowners

Under the DGCL, if the merger is completed, record holders of Rockwell Collins common stock who do not vote in favor of the merger proposal and who otherwise properly exercise and perfect their appraisal rights will be entitled to seek appraisal for, and obtain payment in cash for the judicially determined fair value of, their shares of common stock, in lieu of receiving the merger consideration. The “fair value” could be higher or lower than, or the same as, the merger consideration. The relevant provisions of the DGCL are included as Annex D to this proxy statement/prospectus. Rockwell Collins shareowners are encouraged to read these provisions carefully and in their entirety. Moreover, due to the complexity of the procedures for exercising and perfecting the right to seek appraisal, Rockwell Collins shareowners who are considering exercising and perfecting that right are encouraged to seek the advice of legal counsel. Failure to comply strictly with these provisions may result in loss of the right of appraisal. For a more complete description of Rockwell Collins shareowners’ appraisal rights, see “Appraisal Rights” beginning on page 167.

U.S. Federal Income Tax Consequences

The exchange of Rockwell Collins common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes, and may also be a taxable transaction under applicable state, local or non-U.S. income or other tax laws. In general, for U.S. federal income tax purposes, a U.S. holder (as defined in “The Merger—U.S. Federal Income Tax Consequences” beginning on page 95) of Rockwell Collins common stock who receives the merger consideration in exchange for such U.S. holder’s shares of Rockwell Collins common stock pursuant to the merger will recognize gain or loss in an amount equal to the difference, if any, between (1) the sum of the fair market value of the UTC common stock and the amount of cash, including cash in lieu of a fractional share of UTC common stock, received in the merger and (2) such U.S. holder’s adjusted tax basis in the shares of Rockwell Collins common stock exchanged therefor.

 



 

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In certain circumstances, a holder of Rockwell Collins common stock could be treated as receiving a dividend in an amount up to the cash consideration received by such holder in the merger. As a result of the possibility of such deemed dividend treatment, a non-U.S. holder (as defined in “The Merger—U.S. Federal Income Tax Consequences”) of Rockwell Collins common stock may be subject to U.S. withholding tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) with respect to the cash consideration received in the merger.

For a more complete description of the U.S. federal income tax consequences of the merger, see “The Merger—U.S. Federal Income Tax Consequences” beginning on page 95.

This proxy statement/prospectus contains a discussion of the material U.S. federal income tax consequences of the merger. This discussion does not address any non-U.S. tax consequences, nor does it pertain to any state or local income or other tax consequences. You should consult your own tax advisors regarding the particular U.S. federal income tax consequences to you of the merger in light of your particular circumstances, as well as the particular tax consequences to you of the merger under any state, local or non-U.S. income or other tax laws.

Accounting Treatment

UTC prepares its financial statements in accordance with accounting principles generally accepted in the United States, which is referred to as GAAP. The merger will be accounted for as an acquisition of Rockwell Collins by UTC under the acquisition method of accounting in accordance with GAAP. UTC will be treated as the acquiror for accounting purposes.

Risk Factors

You should consider all the information contained in or incorporated by reference into this proxy statement/prospectus in deciding how to vote for the proposals presented in this proxy statement/prospectus. In particular, you should carefully consider the risks that are described in the section entitled “Risk Factors” beginning on page 39.

 



 

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SELECTED HISTORICAL FINANCIAL DATA

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF UTC

The following table presents selected historical consolidated financial data for UTC as of and for the fiscal years ended December 31, 2016, 2015, 2014, 2013 and 2012 and as of and for the nine months ended September 30, 2017 and 2016. The statement of operations data and cash flow data for the fiscal years ended December 31, 2016, 2015 and 2014 and the balance sheet data as of December 31, 2016 and 2015 have been obtained from UTC’s audited consolidated financial statements incorporated by reference in UTC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which is incorporated by reference into this proxy statement/prospectus. The statement of operations data for the fiscal years ended December 31, 2013 and 2012 and the balance sheet data as of December 31, 2014, 2013 and 2012 have been derived from UTC’s audited consolidated financial statements for such years, which have not been incorporated by reference into this proxy statement/prospectus. The financial data as of and for the nine months ended September 30, 2017 and 2016 have been obtained from UTC’s unaudited condensed consolidated financial statements included in UTC’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, which is incorporated by reference into this proxy statement/prospectus.

The information set forth below is not necessarily indicative of future results and should be read together with the other information contained in UTC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and UTC’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2017, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes therein. See the section entitled “Where You Can Find More Information” beginning on page 174.

 

(dollars in millions, except per

share amounts and ratios)

  Nine Months
Ended

September 30,
    Year Ended
December 31,
 
  2017     2016     2016     2015     2014     2013     2012  

For Nine Months/Year

             

Net sales

  $ 44,157     $ 42,585     $ 57,244     $ 56,098     $ 57,900     $ 56,600     $ 51,101  

Research and development

    1,768       1,711       2,337       2,279       2,475       2,342       2,193  

Restructuring costs

    177       201       290       396       354       431       537  

Net income from continuing operations

    4,434       4,312       5,436 (a)       4,356 (a)       6,468 (a)       5,655 (a)       4,692 (a)  

Net income from continuing operations attributable to common shareowners

    4,155       4,041       5,065 (a)       3,996 (a)       6,066 (a)       5,265 (a)       4,337 (a)  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share—Net income from continuing operations attributable to common shareowners

 

 

 

 

5.26

 

 

 

 

 

 

4.90

 

 

    6.19       4.58       6.75       5.84       4.84  

Diluted earnings per share—Net income from continuing operations attributable to common shareowners

    5.20       4.86       6.13       4.53       6.65       5.75       4.78  

Cash dividends per common share

    2.02       1.94       2.62       2.56       2.36       2.20       2.03  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average number of shares of common stock outstanding:

             

Basic

 

 

 

 

790.3

 

 

 

 

 

 

824.0

 

 

    818.2       872.7       898.3       901.0       895.2  

Diluted

    799.4       831.8       826.1       883.2       911.6       915.1       906.6  

Cash flows provided by operating activities of continuing operations

    3,110       4,567       6,412       6,755       6,979       7,341       5,990  

Capital expenditures

    1,214       1,043       1,699 (b), (c)       1,652 (b), (c)       1,594 (b), (c)       1,569 (b), (c)       1,295 (b), (c)  

Acquisitions, including debt assumed

    196       537       712       556       530       151       18,620  

Repurchases of common stock

    1,430       528       2,254 (d)       10,000 (d)       1,500 (d)       1,200 (d)       —    

Dividends paid on common stock (excluding ESOP)

    1,541       1,561       2,069       2,184       2,048       1,908       1,752  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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(dollars in millions, except per

share amounts and ratios)

  Nine Months
Ended

September 30,
    Year Ended
December 31,
 
  2017     2016     2016     2015     2014     2013     2012  

At Nine-Month/Year End

             

Working capital (c), (e)

  $ 7,714     $ 6,007     $ 6,644     $ 4,088     $ 5,921     $ 5,733     $ 3,948  

Total assets

    96,352       90,062       89,706 (c)       87,484 (c)       86,338 (c)       85,029 (c)       83,499 (c)  

Long-term debt, including current portion

    26,183       21,794       23,300 (c), (f)       19,499 (c), (f)       19,575 (c), (f)       19,744 (c), (f)       22,603 (c), (f)  

Total debt

    27,260       22,665       23,901 (c), (f)       20,425 (c), (f)       19,701 (c), (f)       20,132 (c), (f)       23,106 (c), (f)  

Total debt to total capitalization

    46     42     45 % (f)       41 % (f)       38 % (f)       38 % (f)       46 % (f)  

Total equity

    31,691       30,764       29,169 (f), (g)       28,844 (f), (g)       32,564 (f), (g)       33,219 (f), (g)       27,069 (f), (g)  

 

(a) 2016 amounts include a $423 million pre-tax pension settlement charge resulting from defined benefit plan de-risking actions. 2015 amounts include pre-tax charges of: $867 million as a result of a settlement with the Canadian government, $295 million from customer contract negotiations at UTC Aerospace Systems, and $237 million related to pending and future asbestos claims.
(b) Capital expenditures increased from 2012 through 2016 as UTC expanded capacity to meet expected demand within its aerospace businesses for the next generation engine platforms.
(c) Excludes assets and liabilities of discontinued operations held for sale, for all periods presented.
(d) Share repurchases in 2015 include share repurchases under accelerated repurchase agreements of $2.6 billion in the first quarter of 2015 and $6.0 billion in the fourth quarter of 2015. In connection with the acquisition of Goodrich Corporation, repurchases of common stock under UTC’s share repurchase program were suspended for 2012. UTC resumed its share repurchase program in 2013.
(e) Working capital in 2015 includes approximately $2.4 billion of taxes payable related to the gain on the sale of the Sikorsky Aircraft business, which were paid in 2016. As compared with 2014, 2015 working capital also reflects the reclassification of current deferred tax assets and liabilities to non-current assets and liabilities in connection with the adoption of Accounting Standards Update 2015-17.
(f) The increase in the 2016 debt to total capitalization ratio primarily reflects additional borrowings in 2016 to fund share repurchases and for general corporate purposes. The decrease in the 2013 debt to total capitalization ratio, as compared to 2012, reflects the repayment of approximately $2.9 billion of long-term debt, most of which was used to finance the acquisition of Goodrich Corporation.
(g) The decrease in total equity in 2015, as compared with 2014, reflects the sale of the Sikorsky Aircraft business and the share repurchase program. The decrease in total equity in 2014, as compared with 2013, reflects unrealized losses of approximately $2.9 billion, net of taxes, associated with the effect of market conditions on UTC’s pension plans.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF ROCKWELL COLLINS

The following table presents selected historical consolidated financial data for Rockwell Collins as of and for the fiscal years ended on the Friday closest to September 30. For ease of presentation, September 30 is utilized to represent the fiscal year-end date. Fiscal year 2014 was a 53-week fiscal year, while 2017, 2016, 2015 and 2013 were 52-week fiscal years. The statement of operations data for the fiscal years ended September 30, 2017, 2016 and 2015 and the balance sheet data as of September 30, 2017 and 2016 have been obtained from Rockwell Collins’ audited consolidated financial statements included in Rockwell Collins’ Annual Report on Form 10-K for the fiscal year ended September 30, 2017, which is incorporated by reference into this proxy statement/prospectus. The statement of operations data for the fiscal years ended September 30, 2014 and 2013 and the balance sheet data as of September 30, 2015, 2014 and 2013 have been derived from Rockwell Collins’ audited consolidated financial statements for such years, which have not been incorporated into this document by reference. The results of operations of B/E Aerospace, Inc., referred to as B/E Aerospace, have been included in Rockwell Collins’ operating results for the period subsequent to the completion of Rockwell Collins’ acquisition of B/E Aerospace on April 13, 2017.

The information set forth below is not necessarily indicative of future results and should be read together with the other information contained in Rockwell Collins’ Annual Report on Form 10-K for the fiscal year ended September 30, 2017, including sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and consolidated financial statements and related notes therein. See the section entitled “Where You Can Find More Information” beginning on page 174.

 

(in millions of U.S. dollars, except

per share data)

   Fiscal Year Ended
September 30,
 
   2017 (a)      2016 (b)      2015 (c)      2014 (d)      2013 (e)  

Total sales

   $ 6,822      $ 5,259      $ 5,244      $ 4,979      $ 4,474  

Income from continuing operations

     705        727        694        618        630  

Net income

     705        728        686        604        632  

Cash dividends declared per common share

     1.32        1.32        1.26        1.20        1.20  

Basic income from continuing operations per common share

     4.85        5.57        5.25        4.57        4.62  

Diluted income from continuing operations per common share

     4.79        5.50        5.19        4.52        4.56  

Total Assets

     17,997        7,699        7,294        6,994        5,394  

Long-term Debt, Net

     6,676        1,374        1,670        1,652        560  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) On April 13, 2017, Rockwell Collins completed the acquisition of B/E Aerospace for $6.5 billion in cash and stock, plus the assumption of $2.0 billion of debt, net of cash acquired. To finance the acquisition and repay assumed debt, Rockwell Collins issued 31.2 million shares of common stock, issued $4.35 billion of senior unsecured notes and borrowed $1.5 billion under a new senior unsecured syndicated term loan facility. Income from continuing operations includes $86 million of transaction, integration and financing costs associated with the acquisition of B/E Aerospace ($125 million before income taxes) and $15 million of transaction costs associated with the pending acquisition of the Company by UTC ($24 million before income taxes).
(b) Income from continuing operations includes a $24 million income tax benefit from the retroactive reinstatement of the previously expired Federal Research and Development Tax Credit and a $41 million income tax benefit due to the release of a valuation allowance for a U.S. capital loss carryforward. In addition, income from continuing operations includes $28 million of restructuring and asset impairment charges ($45 million before income taxes).
(c) Income from continuing operations includes a $22 million income tax benefit from the retroactive reinstatement of the previously expired Federal Research and Development Tax Credit and a $16 million income tax benefit related to the remeasurement of certain prior year tax positions.
(d)

Income from continuing operations includes $18 million of restructuring, pension settlement and transaction costs ($25 million before income taxes). Income from continuing operations also includes a $9 million gain

 

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  ($10 million before income taxes) resulting from the sale of a business. On December 23, 2013, Rockwell Collins acquired Radio Holding, Inc. for $1.405 billion. This acquisition was funded through a combination of new long-term debt and short-term commercial paper borrowings.
(e) Net income includes a $19 million income tax benefit related to the retroactive reinstatement of the previously expired Federal Research and Development Tax Credit. Short-term debt includes commercial paper borrowings incurred to fund a portion of Rockwell Collins’ share repurchase program and also includes $200 million related to debt that matured in December 2013.

 

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following selected unaudited pro forma condensed combined financial information gives effect to the merger and the related financing transactions as described in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 135. The selected unaudited pro forma condensed combined balance sheet data as of September 30, 2017 give effect to the merger as if it occurred on September 30, 2017. The selected unaudited pro forma condensed combined statement of operations data for the year ended December 31, 2016 and for the nine months ended September 30, 2017 give effect to the merger as if it occurred on January 1, 2016, the first day of UTC’s 2016 fiscal year. UTC and Rockwell Collins have different fiscal year ends. As a consequence, the Rockwell Collins historical results have been aligned to more closely conform to the fiscal periods of UTC as further described in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 135.

On April 13, 2017, Rockwell Collins completed the acquisition of B/E Aerospace, a leading manufacturer of aircraft cabin interior products and services. The values presented in the selected unaudited pro forma condensed statement of operations data for the nine months ended September 30, 2017 include B/E Aerospace data for the period of January 1, 2017 through April 12, 2017, prior to the acquisition of B/E Aerospace by Rockwell Collins, which was derived from B/E Aerospace’s condensed consolidated financial statements contained within Rockwell Collins’ Current Report on Form 8-K, filed on October 10, 2017 and historical records of B/E Aerospace. The values presented in the selected unaudited pro forma condensed combined balance sheet data reflect Rockwell Collins’ preliminary estimates of the fair value of the assets and liabilities assumed as a result of the acquisition of B/E Aerospace.

The selected pro forma data have been derived from, and should be read in conjunction with, the more detailed unaudited pro forma condensed combined financial information of the combined company appearing elsewhere in this proxy statement/prospectus and the accompanying notes to the pro forma financial information. In addition, the pro forma financial information were based on, and should be read in conjunction with, the historical consolidated financial statements and related notes of UTC, Rockwell Collins and B/E Aerospace for the applicable periods, which have been incorporated in this proxy statement/prospectus by reference. See the sections entitled “Unaudited Pro Forma Condensed Combined Financial Information” and “Where You Can Find More Information” beginning on page 135 and page 174, respectively, for additional information.

 

(Dollars in millions, except per share amounts)

   Nine Months Ended
September 30, 2017
     Year Ended
December 31, 2016
 

Pro Forma Statement of Operations Data:

     

Net sales

   $ 50,592      $ 65,424  

Income from continuing operations attributable to common shareowners

     4,529        5,472  

Income from continuing operations per common share:

     

Basic

   $ 5.29      $ 6.19  

Diluted

     5.24        6.14  

Weighted average common shares outstanding:

     

Basic

     855.7        883.6  

Diluted

     864.8        891.5  

(Dollars in millions)

          As of
September 30, 2017
 

Pro Forma Balance Sheet Data:

     

Cash and cash equivalents

      $ 8,691  

Total assets

        132,979  

Long-term debt, net of current portion

        45,309  

Total equity

        39,210  

 

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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

The following table summarizes unaudited per share data (i) for UTC, Rockwell Collins and B/E Aerospace on a historical basis, (ii) for UTC on a pro forma combined basis giving effect to the merger and (iii) on a pro forma combined equivalent basis calculated by multiplying the pro forma combined data by an exchange ratio of 0.39434, which is the calculated exchange ratio under the two-way collar mechanism, based on the average of the volume-weighted average prices per share of UTC common stock for each of the 20 consecutive trading days ending immediately prior to the closing date, which is assumed to be November 30, 2017 for these pro forma calculations. The actual exchange ratio will be adjusted to reflect changes in the price of UTC common stock prior to the closing of the merger as described in the section entitled “The Merger Agreement—Merger Consideration” beginning on page 101. These computations exclude the $93.33 per share cash portion of the merger consideration.

The unaudited pro forma per share information reflects the merger and related transactions as if they had occurred on January 1, 2016 in the case of income from continuing operations per share, and as if they had occurred on September 30, 2017 in the case of book value per share. The information in the table is based on, and should be read together with, the historical financial information of UTC, Rockwell Collins and B/E Aerospace, which is incorporated by reference in this proxy statement/prospectus and the financial information contained under “Unaudited Pro Forma Condensed Combined Financial Information,” “Selected Historical Financial Data—Selected Historical Consolidated Financial Data of UTC” and “Selected Historical Financial Data—Selected Historical Consolidated Financial Data of Rockwell Collins” beginning on page 135, page 27 and page 29, respectively. See the section entitled “Where You Can Find More Information” beginning on page 174.

The unaudited pro forma combined per share data is presented for illustrative purposes only and is not necessarily indicative of actual or future financial position or results of operations that would have been realized if the merger had been completed as of the dates indicated or will be realized upon the completion of the merger. The summary pro forma information is preliminary, based on initial estimates of the fair value of assets acquired (including intangible assets) and liabilities assumed, and is subject to change as more information regarding the fair values are obtained, which changes could be materially different than the initial estimates.

UTC, Rockwell Collins and B/E Aerospace declared and paid dividends during the periods presented. For more information on dividends of UTC and Rockwell Collins, see the section entitled “Comparative Per Share Market Price and Dividend Information” beginning on page 34.

 

     Historical
United
Technologies
Corporation
     Historical
Rockwell
Collins, Inc.
     Historical
B/E
Aerospace
    Pro Forma
Combined
    Equivalent
Basis
Pro Forma
Combined
 

Income from continuing operations per basic share attributable to common shareowners

            

Nine months ended September 30, 2017

   $ 5.26      $ 3.74        N/A (1)     $ 5.29     $ 2.09  

Twelve months ended December 31, 2016

   $ 6.19      $ 5.67      $ 3.10     $ 6.19     $ 2.44  

Income from continuing operations per diluted share attributable to common shareowners

            

Nine months ended September 30, 2017

   $ 5.20      $ 3.69        N/A (1)     $ 5.24     $ 2.07  

Twelve months ended December 31, 2016

   $ 6.13      $ 5.60      $ 3.08     $ 6.14     $ 2.42  

Cash dividends per share

            

Nine months ended September 30, 2017

   $ 2.02      $ 0.99        N/A (1)       N/A (2)       N/A (2)  

Twelve months ended December 31, 2016

   $ 2.62      $ 1.32      $ 0.84       N/A (2)       N/A (2)  

Book value per share

            

As of September 30, 2017

   $ 37.42      $ 37.10        N/A (1)     $ 43.28     $ 17.08  

 

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(1) Not applicable, as a result of Rockwell Collins’ acquisition of B/E Aerospace on April 13, 2017. The Pro Forma Combined amounts above include the pro forma results of B/E Aerospace for the nine months ended September 30, 2017 and the twelve months ended December 31, 2016.
(2) Pro forma combined dividends per share is not presented, as the dividend per share for UTC will be determined by the UTC Board following completion of the merger.

 

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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

UTC Market Price and Dividend Information

UTC’s common stock is listed on the NYSE under the symbol “UTX.” The following table sets forth the high and low prices per share for UTC’s common stock and cash dividends declared for the periods indicated, each rounded to the nearest whole cent. UTC’s fiscal year ends on December 31.

 

     High
($)
     Low
($)
     Dividend
($)
 

2017:

        

First Quarter

     114.44        106.85        0.66  

Second Quarter

     123.09        111.24        0.66  

Third Quarter

     124.79        109.10        0.70  

Fourth Quarter (through November 30, 2017)

     123.28        115.94        0.70  

2016:

        

First Quarter

     101.00        83.39        0.64  

Second Quarter

     107.07        96.89        0.66  

Third Quarter

     109.83        99.31        0.66  

Fourth Quarter

     111.69        97.62        0.66  

2015:

        

First Quarter

     124.45        110.23        0.64  

Second Quarter

     119.66        110.62        0.64  

Third Quarter

     112.36        85.50        0.64  

Fourth Quarter

     101.04        86.82        0.64  

The declaration of future dividends will be at the discretion of the UTC board of directors, which is referred to as the UTC Board, and will be determined after consideration of various factors, including earnings, cash requirements, the financial condition of UTC and other factors deemed relevant by the UTC Board. Under the merger agreement, prior to the completion of the merger, UTC may continue to pay its regular quarterly cash dividends in the ordinary course consistent with past practice (subject to increase by no more than 15% on a quarterly basis).

 

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Rockwell Collins Market Price and Dividend Information

Rockwell Collins common stock is listed on the NYSE under the symbol “COL.” The following table sets forth the high and low prices per share for Rockwell Collins common stock and cash dividends declared for the periods indicated, each rounded to the nearest whole cent. Rockwell Collins’ fiscal year ends on the Friday closest to September 30.

 

     High
($)
     Low
($)
     Dividend
($)
 

Fiscal 2018:

        

First Quarter (through November 30, 2017)

     136.50        130.56        0.33  

Fiscal 2017:

        

First Quarter

     96.55        78.54        0.33  

Second Quarter

     99.85        88.80        0.33  

Third Quarter

     109.30        96.13        0.33  

Fourth Quarter

     135.31        104.91        0.33  

Fiscal 2016:

        

First Quarter

     95.11        82.26        0.33  

Second Quarter

     93.20        76.03        0.33  

Third Quarter

     94.98        81.04        0.33  

Fourth Quarter

     87.11        80.92        0.33  

Fiscal 2015:

        

First Quarter

     86.60        72.35        0.30  

Second Quarter

     97.49        83.00        0.30  

Third Quarter

     99.37        92.22        0.33  

Fourth Quarter

     93.89        78.15        0.33  

The payment of future dividends is at the discretion of the Rockwell Collins Board. Under the merger agreement, prior to the completion of the merger, Rockwell Collins may only continue to pay its regular quarterly cash dividends of up to $0.33 per share, with record and payment dates for such dividends consistent with past practice, subject to the parties’ coordination of record and payment dates under the merger agreement so that shareowners do not receive dividends twice for any one calendar quarter.

Comparison of UTC and Rockwell Collins Market Prices and Implied Value of Merger Consideration

The following table sets forth the average of the volume-weighted average prices per share of UTC common stock for each of the 20 consecutive trading days ending immediately prior to, and the closing sale price per share of Rockwell Collins common stock as reported on the NYSE as of, each of September 1, 2017, the last trading day prior to the public announcement of the merger, and November 30, 2017, the last practicable trading day before the filing of this proxy statement/prospectus with the SEC. The table also shows the estimated implied value of the per share consideration proposed for each share of Rockwell Collins common stock as of the same two days. This implied value was calculated by multiplying the average of the volume-weighted average prices per share of UTC common stock for each of the 20 consecutive trading days ending immediately prior to those dates by an exchange ratio of 0.39770 (calculated based on the average of the volume-weighted average prices per share of UTC common stock for each of the 20 consecutive trading days ending immediately prior to September 1, 2017) and 0.39434 (calculated based on the average of the volume-weighted average prices per share of UTC common stock for each of the 20 consecutive trading days ending immediately prior to November 30, 2017), as applicable, and adding the cash portion of the merger consideration of $93.33 per share, without interest. The market prices of UTC common stock and Rockwell Collins common stock have fluctuated since the date of the announcement of the merger agreement and will continue to fluctuate from the date of this proxy statement/prospectus to the date of the special meeting and the date the merger is completed and thereafter (in the case of UTC common stock). The exchange ratio will depend upon the UTC stock price during the 20 consecutive trading days ending with the trading day immediately prior to the closing date, and the number of

 

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shares of UTC common stock to be issued as part of the stock consideration (and, in turn, the value of the merger consideration to be received in exchange for each share of Rockwell Collins common stock) may fluctuate with the market value of UTC common stock until the last trading day before the merger is complete.

 

     Volume-Weighted
Average Price Per Share
of UTC Common Stock
     Closing Sale Price
Per Share of
Rockwell Collins
Common Stock
     Implied Per Share Value
of Merger Consideration
 

September 1, 2017

   $ 117.35      $ 130.61      $ 140.00  

November 30, 2017

   $ 118.35      $ 132.31      $ 140.00  

No assurance can be given concerning the market prices of UTC common stock or Rockwell Collins common stock before completion of the merger or UTC common stock after completion of the merger. The exchange ratio will depend upon the UTC stock price during the 20 consecutive trading days ending with the trading day immediately prior to the closing date, and the number of shares of UTC common stock to be issued as part of the stock consideration (and, in turn, the value of the merger consideration to be received in exchange for each share of Rockwell Collins common stock) when received by Rockwell Collins shareowners after the merger is completed could be greater than, less than or the same as shown in the table above. Accordingly, shareowners are advised to obtain current market quotations for UTC common stock and Rockwell Collins common stock in deciding whether to vote in favor of the merger proposal.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus contains statements which, to the extent they are not statements of historical or present fact, constitute “forward-looking statements” under the securities laws. These forward-looking statements are intended to provide management’s current expectations or plans for future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as “believe,” “expect,” “expectations,” “plans,” “strategy,” “prospects,” “estimate,” “project,” “target,” “anticipate,” “will,” “may,” “should,” “see,” “guidance,” “confident” and other words of similar meaning in connection with a discussion of future operating or financial performance. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, share repurchases and other measures of financial performance or potential future plans, strategies or transactions of UTC or the combined company following UTC’s acquisition of Rockwell Collins, the anticipated benefits of the merger, including estimated synergies, the expected timing of completion of the merger, UTC’s ability to obtain financing for the merger and other statements that are not historical facts. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For those statements, UTC and Rockwell Collins claim the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995. Such risks, uncertainties and other factors include, without limitation:

 

    the ability of the parties to receive the required regulatory approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the merger) and approval by the Rockwell Collins shareowners and to satisfy the other conditions to the closing of the merger on a timely basis or at all;

 

    the occurrence of events that may give rise to a right of one or both of the parties to terminate the merger agreement, including under circumstances that might require Rockwell Collins to pay a termination fee of $695 million to UTC or $50 million of expense reimbursement;

 

    the possibility that the merger is delayed or does not occur;

 

    the possibility that the anticipated benefits from the merger cannot be realized in full or at all or may take longer to realize than expected, including risks associated with achieving expected synergies from the merger;

 

    negative effects of the announcement or the completion of the merger on the market price of UTC’s and/or Rockwell Collins’ common stock and/or on their respective financial performance;

 

    the risks related to Rockwell Collins and UTC being restricted in their operation of the business while the merger agreement is in effect;

 

    risks relating to the value of UTC’s shares to be issued in the merger, significant merger costs and/or unknown liabilities;

 

    risks associated with third-party contracts containing change in control consent requirements and/or other provisions that may be triggered by the merger;

 

    risks associated with merger-related litigation or appraisal proceedings;

 

    the ability of UTC and Rockwell Collins, or the combined company, to retain and hire key personnel;

 

    future levels of indebtedness, including indebtedness expected to be incurred by UTC in connection with the merger, and capital spending and research and development spending;

 

    the timing and scope of future repurchases of UTC’s common stock, which may be suspended at any time due to market conditions, and the level of other investing activities and uses of cash, including in connection with the merger;

 

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    the effect of economic conditions in the industries and markets in which UTC and Rockwell Collins operate in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, levels of end market demand in construction and in both the commercial and defense segments of the aerospace industry, levels of air travel, financial condition of commercial airlines, the impact of weather conditions and natural disasters and the financial condition of UTC’s and Rockwell Collins’ customers and suppliers;

 

    the scope, nature, impact or timing of acquisition and divestiture activity, including among other things integration of acquired businesses, including Rockwell Collins, into UTC’s existing businesses and realization of synergies and opportunities for growth and innovation;

 

    challenges in the development, production, delivery, support, performance and realization of the anticipated benefits of advanced technologies and new products and services;

 

    future availability of credit and factors that may affect such availability, including credit market conditions and UTC’s and Rockwell Collins’ capital structure;

 

    delays and disruption in delivery of materials and services from suppliers;

 

    company and customer-directed cost reduction efforts and restructuring costs and savings and other consequences thereof;

 

    new business or investment opportunities;

 

    UTC’s ability to realize the intended benefits of organizational changes;

 

    the anticipated benefits of diversification and balance of operations across product lines, regions and industries;

 

    the outcome of legal proceedings, investigations and other contingencies;

 

    pension plan assumptions and future contributions;

 

    the impact of the negotiation of collective bargaining agreements and labor disputes;

 

    the effect of changes in political conditions in the U.S. and other countries in which UTC and Rockwell Collins operate, including the effect of changes in U.S. trade policies or the U.K.’s pending withdrawal from the EU, on general market conditions, global trade policies and currency exchange rates in the near term and beyond;

 

    the effect of changes in tax, environmental, regulatory (including among other things import/export) and other laws and regulations in the U.S. and other countries in which UTC and Rockwell Collins operate; and

 

    other risk factors as detailed from time to time in UTC’s and Rockwell Collins’ reports filed with the SEC, including UTC’s and Rockwell Collins’ respective annual reports on Form 10-K, quarterly reports on Form 10-Q, periodic current reports on Form 8-K and other documents filed with the SEC, including the risks and uncertainties set forth in or incorporated by reference into this proxy statement/prospectus in the section entitled “Risk Factors” beginning on page 39.

There can be no assurance that the merger or any other transaction described will in fact be completed in the manner described or at all. Any forward-looking statement speaks only as of the date on which it is made, and UTC and Rockwell Collins assume no obligation to update or revise such statement, whether as a result of new information, future events or otherwise, except as required by applicable law. Readers are cautioned not to place undue reliance on any of these forward-looking statements.

 

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RISK FACTORS

In addition to the other information included and incorporated by reference into this proxy statement/prospectus, including, among other things, the matters addressed in the section entitled “Cautionary Note Regarding Forward-Looking Statements” beginning on page 37, Rockwell Collins shareowners should carefully consider the following risk factors before deciding whether to vote in favor of the merger proposal. In addition, you should read and consider the risks associated with each of the businesses of UTC and Rockwell Collins because these risks will relate to the combined company following the completion of the merger. Descriptions of some of these risks can be found in the UTC Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and the Rockwell Collins Annual Report on Form 10-K for the fiscal year ended September 30, 2017, as such risks may be updated or supplemented in each company’s subsequently filed Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, which are incorporated by reference into this proxy statement/prospectus. You should also consider the other information in this document and the other documents incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 174.

Risks Related to the Merger

The merger is subject to conditions, some or all of which may not be satisfied, or completed on a timely basis, if at all. Failure to complete the merger could have material adverse effects on Rockwell Collins.

The completion of the merger is subject to a number of conditions, including, among other things, receipt of the shareowner approval and receipt of certain regulatory approvals, which make the completion and timing of the completion of the merger uncertain. See the section entitled “The Merger Agreement—Conditions to the Merger,” beginning on page 120, for a more detailed discussion. The failure to satisfy all of the required conditions could delay the completion of the merger for a significant period of time or prevent it from occurring at all. Any delay in completing the merger could cause UTC not to realize some or all of the benefits, or realize them on a different timeline than expected, that UTC expects to achieve if the merger is successfully completed within the expected timeframe. There can be no assurance that the conditions to the closing of the merger will be satisfied or waived or that the merger will be completed. Also, subject to limited exceptions, either UTC or Rockwell Collins may terminate the merger agreement if the merger has not been completed by 5:00 p.m. (New York time) on September 4, 2018, subject to extension through March 4, 2019, if all conditions other than certain antitrust-related conditions are or would be satisfied on that date.

If the merger is not completed, Rockwell Collins’ ongoing business may be materially adversely affected and, without realizing any of the benefits of having completed the merger, Rockwell Collins will be subject to a number of risks, including the following:

 

    the market price of Rockwell Collins common stock could decline;

 

    Rockwell Collins could owe a substantial termination fee to UTC under certain circumstances;

 

    if the merger agreement is terminated and the Rockwell Collins Board seeks another business combination, Rockwell Collins shareowners cannot be certain that Rockwell Collins will be able to find a party willing to enter into a transaction on terms equivalent to or more attractive than the terms that UTC has agreed to in the merger agreement;

 

    time and resources, financial and other, committed by Rockwell Collins’ management to matters relating to the merger could otherwise have been devoted to pursuing other beneficial opportunities for Rockwell Collins;

 

    Rockwell Collins may experience negative reactions from the financial markets or from its customers, suppliers or employees; and

 

    Rockwell Collins will be required to pay its costs relating to the merger, such as legal, accounting, financial advisory and printing fees, whether or not the merger is completed.

 

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In addition, if the merger is not completed, Rockwell Collins could be subject to litigation related to any failure to complete the merger or related to any enforcement proceeding commenced against Rockwell Collins to perform its obligations under the merger agreement. Any of these risks could materially and adversely impact Rockwell Collins’ ongoing business, financial condition, financial results and stock price.

Similarly, delays in the completion of the merger could, among other things, result in additional transaction costs, loss of revenue or other negative effects associated with uncertainty about completion of the merger and could materially and adversely impact UTC’s ongoing business, financial condition, financial results and stock price following the completion of the merger.

The merger agreement contains provisions that limit Rockwell Collins’ ability to pursue alternatives to the merger, could discourage a potential competing acquiror of Rockwell Collins from making a favorable alternative transaction proposal and, in specified circumstances, could require Rockwell Collins to pay a substantial termination fee to UTC.

The merger agreement contains provisions that make it more difficult for Rockwell Collins to be acquired by any person other than UTC. The merger agreement contains certain provisions that restrict Rockwell Collins’ ability to, among other things, initiate, seek, solicit, knowingly facilitate, knowingly encourage, knowingly induce or knowingly take any other action reasonably expected to lead to, or engage in negotiations or discussions relating to, or approve or recommend, any third-party acquisition proposal. Further, even if the Rockwell Collins Board withdraws or qualifies its recommendation with respect to the approval of the merger proposal, unless the merger agreement is terminated in accordance with its terms, Rockwell Collins will still be required to submit the merger proposal to a vote at the special meeting of Rockwell Collins shareowners. In addition, following receipt by Rockwell Collins of any third-party acquisition proposal that constitutes a “superior proposal,” UTC will have an opportunity to offer to modify the terms of the merger agreement before the Rockwell Collins Board may withdraw or qualify its recommendation with respect to the merger proposal in favor of such superior proposal, as described further under “The Merger Agreement—Covenants and Agreements—Superior Proposal” beginning on page 116.

In some circumstances, upon termination of the merger agreement, Rockwell Collins would be required to pay a termination fee of $695 million to UTC or reimburse certain expenses of UTC in connection with the transactions contemplated by the merger agreement. For further discussion, see the sections entitled “The Merger Agreement—Termination;—Effect of Termination;—Termination Fee and Expense Reimbursement” beginning on pages 122, 123 and 124, respectively.

These provisions could discourage a potential third-party acquiror or merger partner that might have an interest in acquiring all or a significant portion of Rockwell Collins or pursuing an alternative transaction from considering or proposing such a transaction, even if it were prepared to pay consideration with a higher per share value than the value proposed to be received in the merger. In particular, the termination fee, if applicable, would be substantial, and could result in a potential third-party acquiror or merger partner proposing to pay a lower price to the Rockwell Collins shareowners than it might otherwise have proposed to pay absent such a fee.

If the merger agreement is terminated and Rockwell Collins determines to seek another business combination, Rockwell Collins may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the merger.

The merger is subject to the expiration or termination of applicable waiting periods and the receipt of approvals, consents or clearances from several regulatory authorities that may impose conditions that could have an adverse effect on UTC, Rockwell Collins or the combined company or, if not obtained, could prevent completion of the merger.

Before the merger may be completed, any applicable waiting period (and any extension thereof) under the HSR Act relating to the completion of the merger must have expired or been terminated and any authorization or

 

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consent from a governmental authority required to be obtained with respect to the merger under certain other applicable foreign regulatory laws must have been obtained. In deciding whether to grant the required regulatory authorization or consent, the relevant governmental entities will consider the effect of the merger within their relevant jurisdiction, including the impact on the parties’ respective customers and suppliers. The terms and conditions of the authorizations and consents that are granted, if any, may impose requirements, limitations or costs or place restrictions on the conduct of the combined company’s business or may materially delay the completion of the merger.

Under the merger agreement, UTC and Rockwell Collins have agreed to use their respective reasonable best efforts to obtain such authorizations and consents and UTC has agreed to take any and all steps necessary to avoid or eliminate impediments under any antitrust or certain other laws that may be asserted by any governmental authority so as to enable the completion of the merger as promptly as practicable. However, UTC’s obligation to take actions required to obtain authorizations and consents under such laws is subject to limitations, including that UTC will not be required to commit to or effect (1) any sale, divestiture or other transfer if such action would require the sale, divestiture or other transfer of any assets, properties, businesses or product lines representing, in the aggregate, more than $850 million in annual revenues or (2) any other restriction or action if such restriction or action, individually or taken together with all sales, divestitures, transfers or other restrictions or actions in the aggregate, would or would reasonably be expected to have a materially adverse impact on Rockwell Collins, UTC or any of their respective subsidiaries (in each case measured on a scale relative to the size of Rockwell Collins and its subsidiaries, taken as a whole) or on the expected benefits to UTC of the merger. For a more detailed description of UTC’s and Rockwell Collins’ obligations to obtain required regulatory authorizations and approvals, see the section entitled “The Merger Agreement—Covenants and Agreements—Appropriate Action; Consents; Filings” beginning on page 112.

In addition, at any time before or after the completion of the merger, and notwithstanding the termination of applicable waiting periods, the applicable U.S. or foreign antitrust authorities or any state attorney general could take such action under the antitrust laws as such party deems necessary or desirable in the public interest. Such action could include, among other things, seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of the parties. In addition, in some circumstances, a third party could initiate a private action under antitrust laws challenging, seeking to enjoin, or seeking to impose conditions on the merger. UTC and Rockwell Collins may not prevail and may incur significant costs in defending or settling any such action. For a more detailed description of the regulatory review process, see the section entitled “The Merger—Regulatory Approvals” beginning on page 95.

There can be no assurance that the conditions to the completion of the merger set forth in the merger agreement relating to applicable regulatory laws will be satisfied.

The value of the stock portion of the merger consideration is subject to changes based on fluctuations in the value of UTC common stock, and Rockwell Collins shareowners may, in certain circumstances, receive stock consideration with a value that, at the time received, is less than $46.67 per share of Rockwell Collins common stock.

The market value of UTC common stock will fluctuate during the period before the date of the special meeting, during the 20 trading day period that the exchange ratio will be based upon, and the time between the last day of the 20 trading day period and the time Rockwell Collins shareowners receive merger consideration in the form of UTC common stock, as well as thereafter. Accordingly, at the time of the special meeting, Rockwell Collins shareowners will not be able to determine the market value of the per share merger consideration they would receive upon completion of the merger.

Upon completion of the merger, each issued and outstanding share of Rockwell Collins common stock (other than excluded shares) will be converted into the right to receive the merger consideration, which is equal to $93.33 in cash, without interest, plus a fraction of a share of UTC common stock having a value equal to the

 

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quotient obtained by dividing $46.67 by the average of the volume-weighted average prices per share of UTC common stock on the NYSE on each of the 20 consecutive trading days ending with the trading day immediately prior to the closing date, subject to adjustment based on a two-way collar mechanism as described below. If the UTC stock price is greater than $107.01 but less than $124.37, the exchange ratio will be equal to the quotient of (1) $46.67 divided by (2) the UTC stock price. However, if the UTC stock price is less than or equal to $107.01 or greater than or equal to $124.37, then a two-way collar mechanism will apply, pursuant to which (a) if the UTC stock price is greater than or equal to $124.37, the exchange ratio will be fixed at 0.37525 and result in more than $46.67 in value, and (b) if the UTC stock price is less than or equal to $107.01, the exchange ratio will be fixed at 0.43613 and result in less than $46.67 in value. Accordingly, the actual number of shares and the value of UTC common stock delivered to Rockwell Collins shareowners will depend on the UTC stock price, and the value of the shares of UTC common stock delivered for each such share of Rockwell Collins common stock may be greater than, less than or equal to $46.67.

It is impossible to accurately predict the market price of UTC common stock at the completion of the merger or during the period over which the UTC stock price is calculated and, therefore, impossible to accurately predict the number or value of the shares of UTC common stock that Rockwell Collins shareowners will receive in the merger. The market price for UTC common stock may fluctuate both prior to completion of the merger and thereafter for a variety of reasons, including, among others, general market and economic conditions, the demand for UTC’s or Rockwell Collins’ products and services, changes in laws and regulations, other changes in UTC’s and Rockwell Collins’ respective businesses, operations, prospects and financial results of operations, market assessments of the likelihood that the merger will be completed, and the expected timing of the merger. Many of these factors are beyond UTC’s and Rockwell Collins’ control. You should obtain current market quotations for shares of UTC common stock.

Each party is subject to business uncertainties and contractual restrictions while the merger is pending, which could adversely affect each party’s business and operations.

In connection with the pendency of the merger, it is possible that some customers, suppliers and other persons with whom UTC and/or Rockwell Collins has a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationships with UTC or Rockwell Collins, as the case may be, as a result of the merger or otherwise, which could negatively affect UTC’s or Rockwell Collins’ respective revenues, earnings and/or cash flows, as well as the market price of UTC common stock or Rockwell Collins common stock, regardless of whether the merger is completed.

Under the terms of the merger agreement, Rockwell Collins is subject to certain restrictions on the conduct of its business prior to completing the merger which may adversely affect its ability to execute certain of its business strategies, including the ability in certain cases to enter into or amend contracts, acquire or dispose of assets, incur indebtedness or incur capital expenditures. Such limitations could adversely affect Rockwell Collins’ business and operations prior to the completion of the merger.

Under the terms of the merger agreement, UTC is subject to a more limited set of restrictions on the conduct of its business prior to completing the merger which may adversely affect its ability to execute certain of its business strategies, including the ability in certain cases to amend its organizational documents, pay dividends or distributions or repurchase shares of UTC common stock. Such limitations could adversely affect UTC’s business and operations prior to the completion of the merger.

Each of the risks described above may be exacerbated by delays or other adverse developments with respect to the completion of the merger. For further discussion, see the section entitled “The Merger Agreement—Covenants and Agreements—Conduct of Business of Rockwell Collins;—Conduct of Business of UTC” beginning on pages 108 and 111, respectively.

 

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Completion of the merger will trigger change in control or other provisions in certain customer and other agreements to which Rockwell Collins is a party, which may have an adverse impact on UTC’s business and results of operations following completion of the merger.

The completion of the merger will trigger change in control and other provisions in certain customer and other agreements to which Rockwell Collins is a party. If UTC or Rockwell Collins is unable to negotiate waivers of those provisions, customers or other counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages or equitable remedies. Even if UTC and Rockwell Collins are able to negotiate consents or waivers, the customers or other counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to Rockwell Collins or the combined company. Certain customers of Rockwell Collins have commented on the potential impact of the merger, including potential benefits, questions and concerns. Any of the foregoing or similar developments may have an adverse impact on UTC’s business and results of operations following completion of the merger.

Uncertainties associated with the merger may cause a loss of management personnel and other key employees, which could adversely affect the future business and operations of UTC following completion of the merger.

UTC and Rockwell Collins are dependent on the experience and industry knowledge of their officers and other key employees to execute their business plans. UTC’s success after the completion of the merger will depend in part upon the ability of UTC to retain certain key management personnel and employees of UTC and Rockwell Collins. Prior to completion of the merger, current and prospective employees of UTC and Rockwell Collins may experience uncertainty about their roles within UTC following the completion of the merger, which may have an adverse effect on the ability of each of UTC and Rockwell Collins to attract or retain key management and other key personnel. In addition, no assurance can be given that UTC, after the completion of the merger, will be able to attract or retain key management personnel and other key employees to the same extent that UTC and Rockwell Collins have previously been able to attract or retain their own employees.

Litigation filed or that may be filed against UTC, Rockwell Collins, Merger Sub and the members of the Rockwell Collins Board could prevent or delay the consummation of the merger.

In connection with the merger, several lawsuits have been filed by purported Rockwell Collins shareowners. The lawsuits seek an injunction barring the merger, rescission of the merger in the event it has been consummated, recovery of damages and other relief. For a more detailed description of litigation in connection with the merger, see “The Merger—Litigation Relating to the Merger” beginning on page 100.

The outcome of these lawsuits or any other lawsuit that may be filed challenging the merger is uncertain. One of the conditions to the closing of the merger is that no governmental authority has issued or entered any order after the date of the merger agreement having the effect of enjoining or otherwise prohibiting the consummation of the merger, and these lawsuits seek and potential other lawsuits may seek an order enjoining consummation of the merger. Accordingly, if these lawsuits or any future lawsuit is successful in obtaining an order enjoining consummation of the merger, then such order may prevent the merger from being completed, or from being completed within the expected time frame, and could result in substantial costs to UTC and Rockwell Collins including, but not limited to, costs associated with the indemnification of directors and officers. Any such injunction or delay in the merger being completed may adversely affect UTC’s and Rockwell Collins’ business, financial condition, results of operations and cash flows.

The unaudited pro forma condensed combined financial information in this proxy statement/prospectus is presented for illustrative purposes only and may not be reflective of the operating results and financial condition of UTC following completion of the merger.

The unaudited pro forma condensed combined financial information in this proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what UTC’s actual financial position

 

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or results of operations would have been had the merger been completed on the dates indicated. The unaudited pro forma condensed combined financial information is subject to a number of assumptions, and does not take into account any synergies related to the proposed transaction. Further, UTC’s actual results and financial position after the merger may differ materially and adversely from the unaudited pro forma condensed combined financial data that is included in this proxy statement/prospectus. The unaudited pro forma condensed combined financial information has been prepared with the expectation, as of the date of this proxy statement/prospectus, that UTC will be identified as the acquiror under GAAP and reflects adjustments based upon preliminary estimates of the fair value of assets to be acquired and liabilities to be assumed. The final acquisition accounting will be based upon the actual purchase price and the fair value of the assets and liabilities of the party that is determined to be the acquiree under GAAP as of the date of the completion of the merger. In addition, subsequent to the closing date, there will be further refinements of the acquisition accounting as additional information becomes available. Accordingly, the final acquisition accounting may differ materially from the unaudited pro forma condensed combined financial information reflected in this document. For further discussion, see “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 135.

Rockwell Collins’ executive officers and directors have interests in the merger that may be different from, or in addition to, Rockwell Collins shareowners’ interests.

When considering the recommendation of the Rockwell Collins Board that Rockwell Collins shareowners adopt the merger agreement and approve the merger, the shareowners should be aware that directors and executive officers of Rockwell Collins have certain interests in the merger that may be different from, or in addition to, the interests of Rockwell Collins shareowners. The Rockwell Collins Board was aware of these interests and considered them, among other matters, when it approved the merger agreement and in making its recommendations that the Rockwell Collins shareowners approve the merger proposal. Additional interests of the directors and executive officers of Rockwell Collins include, but are not limited to, the treatment in the merger of restricted stock awards, RSU awards, stock options and DSU awards held by these directors and executive officers, certain severance payments and other benefits that Rockwell Collins executive officers are, by reason of their respective change of control agreements with Rockwell Collins, entitled to receive upon a qualifying termination of employment following the completion of the merger, the continued employment of certain executive officers with UTC following the completion of the merger, including the designation of Mr. Ortberg as the chief executive officer of the combined aerospace systems business of UTC and Rockwell Collins, and indemnification and insurance for current and former directors and executive officers. See the section entitled “The Merger—Interests of Directors and Executive Officers of Rockwell Collins in the Merger” beginning on page 84 for a more detailed description of these interests. As a result of these interests, these directors and executive officers of Rockwell Collins might be more likely to support and to vote in favor of the proposals described in this proxy statement/prospectus than if they did not have these interests. Rockwell Collins shareowners should consider whether these interests might have influenced these directors and executive officers to recommend adopting the merger agreement and approving the merger.

Risks Related to the Combined Company After Completion of the Merger

UTC may be unable to successfully integrate the businesses of UTC and Rockwell Collins and realize the anticipated benefits of the merger.

The success of the merger will depend, in part, on UTC’s ability to successfully combine and integrate the businesses of UTC and Rockwell Collins, which currently operate as independent public companies, and realize the anticipated benefits, including synergies, cost savings, innovation opportunities and operational efficiencies, from the merger, in a manner that does not materially disrupt existing customer, supplier and employee relations nor result in decreased revenues due to losses of, or decreases in orders by, customers. If UTC is unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be realized fully or at all, or may take longer to realize than expected, and the value of UTC’s common stock may decline.

 

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The integration of the two companies may result in material challenges, including, without limitation:

 

    the diversion of management’s attention from ongoing business concerns and performance shortfalls at one or both of the companies as a result of the devotion of management’s attention to the merger;

 

    managing a larger combined aerospace systems business;

 

    maintaining employee morale and retaining key management and other employees;

 

    retaining existing business and operational relationships, including customers, suppliers and employees and other counterparties, as may be impacted by contracts containing consent and/or other provisions that may be triggered by the merger, and attracting new business and operational relationships;

 

    the possibility of faulty assumptions underlying expectations regarding the integration process;

 

    consolidating corporate and administrative infrastructures and eliminating duplicative operations;

 

    coordinating geographically separate organizations;

 

    unanticipated issues in integrating information technology, communications and other systems; and

 

    unforeseen expenses or delays associated with the merger.

Many of these factors will be outside of UTC’s control, and any one of them could result in delays, increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy, which could materially affect UTC’s financial position, results of operations and cash flows.

In addition, Rockwell Collins completed its merger with B/E Aerospace on April 13, 2017, and the integration of the Rockwell Collins and B/E Aerospace businesses is still in process. This ongoing integration may increase the complexity of, and challenges associated with, the integration of the businesses of UTC and Rockwell Collins, which may make it more difficult for UTC to achieve the anticipated benefits of the merger fully or at all, or within the anticipated time frame.

Due to legal restrictions, UTC and Rockwell Collins are currently permitted to conduct only limited planning for the integration of the two companies following the merger and have not yet determined the exact nature of how the businesses and operations of the two companies will be combined after the merger. The actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized on a timely basis, if at all.

Rockwell Collins shareowners will have a reduced ownership and voting interest after the merger and will exercise less influence over the policies of UTC following the merger than they now have on the policies of Rockwell Collins.

Rockwell Collins shareowners presently have the right to vote in the election of the Rockwell Collins Board and on other matters affecting Rockwell Collins. Upon the completion of the merger, except for shareowners who own common shares in both Rockwell Collins and UTC, each Rockwell Collins shareowner will be a shareowner of UTC with a percentage ownership of UTC that is smaller than such shareowner’s current percentage ownership of Rockwell Collins. UTC shareowners will also have a somewhat reduced ownership and voting interest after the merger. Immediately after the merger is completed, it is expected that current UTC shareowners will own approximately 93% of UTC’s common stock outstanding and current Rockwell Collins shareowners will own approximately 7% of UTC’s common stock outstanding (based on the calculated exchange ratio under the two-way collar mechanism, based on the average of the volume-weighted average prices per share of UTC common stock for each of the 20 consecutive trading days ending immediately prior to the closing date, which closing date is assumed to be November 30, 2017, the last practicable trading day before the filing of this proxy statement/prospectus with the SEC), as set forth in the section entitled “Comparative Per Share Market Price and Dividend Information—Comparison of UTC and Rockwell Collins Market Prices and Implied Value of Merger Consideration,” and assuming no overlap between UTC and Rockwell Collins shareowners.

 

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As a result, current Rockwell Collins shareowners will have less influence on the management and policies of UTC than they now have on the management and policies of Rockwell Collins.

The UTC common stock to be received by Rockwell Collins shareowners upon completion of the merger will have different rights from shares of Rockwell Collins common stock.

Upon completion of the merger, Rockwell Collins shareowners will no longer be shareowners of Rockwell Collins, but will instead become shareowners of UTC and their rights as UTC shareowners will be governed by the terms of UTC’s certificate of incorporation and by-laws. The terms of UTC’s certificate of incorporation and by-laws are in some respects materially different than the terms of Rockwell Collins’ certificate of incorporation and by-laws, which currently govern the rights of Rockwell Collins shareowners.

For a more complete description of the different rights associated with shares of Rockwell Collins common stock and shares of UTC common stock, see “Comparison of Shareowner Rights” beginning on page 154.

The future results of UTC may be adversely impacted if UTC does not effectively manage its expanded operations following the completion of the merger.

Following the completion of the merger, the size of UTC’s aerospace business will be significantly larger than the current size of either Rockwell Collins’ business or UTC’s aerospace business. UTC’s ability to successfully manage this expanded business will depend, in part, upon management’s ability to design and implement strategic initiatives that address not only the integration of UTC and Rockwell Collins, including the continuing integration of the businesses of Rockwell Collins and B/E Aerospace, but also the increased scale and scope of the combined business with its associated increased costs and complexity. There can be no assurances that UTC will be successful in integrating the businesses or that it will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the merger.

UTC expects to incur substantial expenses related to the completion of the merger and the integration of UTC’s aerospace business and Rockwell Collins.

UTC will incur substantial expenses in connection with the completion of the merger and in order to integrate a large number of processes, policies, procedures, operations, technologies and systems of Rockwell Collins in connection with the merger. The substantial majority of these costs will be non-recurring expenses related to the merger (including financing of the merger) and facilities and systems consolidation costs. UTC may incur additional costs or suffer loss of business under third-party contracts that are terminated or that contain change in control or other provisions that may be triggered by the completion of the merger, and/or losses of, or decreases in orders by, customers, and may also incur costs to maintain employee morale and to retain certain key management personnel and employees. UTC and Rockwell Collins will also incur transaction fees and costs related to formulating integration plans for the combined business, and the execution of these plans may lead to additional unanticipated costs and time delays. These incremental transaction-related costs may exceed the savings UTC expects to achieve from the elimination of duplicative costs and the realization of other efficiencies related to the integration of the businesses, particularly in the near term and in the event there are material unanticipated costs. Factors beyond UTC’s control could affect the total amount or timing of these expenses, many of which, by their nature, are difficult to estimate accurately.

After the completion of the merger, UTC will be more leveraged than it is currently and the financing arrangements that UTC will enter into may, under certain circumstances, contain restrictions and limitations that could impact its ability to operate its business.

In connection with the merger, UTC intends to seek approximately $14.4 billion in additional indebtedness, and UTC will assume approximately $7.2 billion of Rockwell Collins’ outstanding indebtedness. After the completion of the merger, UTC will have consolidated indebtedness of approximately $49 billion. The increased

 

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indebtedness of UTC after the completion of the merger may have the effect, among other things, of reducing the flexibility of UTC to respond to changing business and economic conditions, requiring UTC to use increased amounts of cash flow to service indebtedness and increasing UTC’s borrowing costs.

UTC also expects that the agreements governing the indebtedness that it will incur will contain covenants that may, under certain circumstances, place limitations on certain actions that UTC could seek to undertake. Various risks, uncertainties and events beyond UTC’s control could affect its ability to comply with the covenants contained in its debt agreements. Failure to comply with any of the covenants in its existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity of the indebtedness under these agreements. In addition, the limitations imposed by financing agreements on UTC’s ability to incur additional indebtedness and to take other actions might impair its ability to obtain other financing on terms acceptable to UTC.

The market price of UTC’s common stock after the merger is completed may be affected by factors different from those affecting the price of UTC or Rockwell Collins common stock before the merger is completed.

Upon completion of the merger, holders of Rockwell Collins common stock will be holders of common stock of UTC. As the businesses of UTC and Rockwell Collins are different, considering that UTC segments operate in the elevator, escalator, HVAC, security and fire safety, aircraft engine and other industries, whereas Rockwell Collins does not, the results of operations as well as the price of UTC’s common stock may, in the future, be affected by factors different from those factors affecting Rockwell Collins as an independent stand-alone company. UTC will face additional risks and uncertainties that Rockwell Collins may currently not be exposed to as an independent company. As a result, the market price of UTC’s shares may fluctuate significantly following completion of the merger. For a discussion of the businesses of UTC and Rockwell Collins and of some important factors to consider in connection with those businesses, see the documents incorporated by reference into this proxy statement/prospectus and referred to under “Where You Can Find More Information” beginning on page 174.

The market price of UTC’s common stock may decline as a result of the merger, including as a result of some Rockwell Collins shareowners adjusting their portfolios.

The market price of UTC’s common stock may decline as a result of the merger if, among other things, the operational cost savings estimates in connection with the integration of UTC’s and Rockwell Collins’ businesses are not realized, or if the transaction costs related to the merger are greater than expected, or if the financing related to the merger is on unfavorable terms. The market price also may decline if UTC does not achieve the perceived benefits of the merger as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the merger on UTC’s financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts.

In addition, sales of UTC common stock after the completion of the merger may cause the market price of UTC common stock to decrease. Assuming the last reported sale price of UTC common stock was equal to the UTC stock price used for the exchange ratio, UTC would issue approximately 65 million shares, including share equity awards, of UTC common stock in connection with the merger, based on the number of outstanding shares, including share equity awards, of Rockwell Collins common stock as of November 30, 2017 and the last reported sale price of UTC common stock on November 30, 2017. Many Rockwell Collins shareowners may decide not to hold the shares of UTC common stock they will receive in the merger. Other Rockwell Collins shareowners, such as funds with limitations on their permitted holdings of stock in individual issuers, may be required to sell the shares of UTC common stock that they receive in the merger. Such sales of UTC common stock could have the effect of depressing the market price for UTC common stock and may take place promptly following the merger.

Any of these events may make it more difficult for UTC to sell equity or equity-related securities, dilute your ownership interest in UTC and have an adverse impact on the price of UTC common stock.

 

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Other Risk Factors

UTC’s and Rockwell Collins’ businesses are and will be subject to the risks described above. In addition, UTC and Rockwell Collins are, and will continue to be, subject to the risks described in, as applicable, the UTC annual report on Form 10-K for the fiscal year ended December 31, 2016, and the Rockwell Collins annual report on Form 10-K for the fiscal year ended September 30, 2017, as updated by subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 174 for the location of information incorporated by reference into this proxy statement/prospectus.

 

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THE PARTIES TO THE MERGER

UTC

UTC provides high technology products and services to the building systems and aerospace industries worldwide. UTC conducts its business through four principal segments: Otis, UTC Climate, Controls & Security, Pratt & Whitney and UTC Aerospace Systems. Each segment groups similar operating companies, and the management organization of each segment has general operating autonomy over a range of products and services. Otis and UTC Climate, Controls & Security (collectively referred to as the “commercial businesses”) serve customers in the commercial, government, infrastructure and residential property sectors and transport and refrigeration businesses worldwide. Pratt & Whitney and UTC Aerospace Systems (collectively referred to as the “aerospace businesses”) primarily serve commercial and government customers in both the original equipment and aftermarket parts and services markets of the aerospace industry. The principal products and services of each segment are as follows:

 

    Otis —Otis is an elevator and escalator manufacturing, installation and service company and designs, manufactures, sells and installs passenger and freight elevators for low-, medium- and high-speed applications, as well as a broad line of escalators and moving walkways. In addition to new equipment, Otis provides modernization products to upgrade elevators and escalators as well as maintenance and repair services for both its products and those of other manufacturers. Otis serves customers in the commercial and residential property industries around the world.

 

    UTC Climate, Controls  & Security —UTC Climate, Controls & Security is a provider of heating, ventilating, air conditioning (HVAC) and refrigeration solutions, including controls for residential, commercial, industrial and transportation applications. These products and services are sold to building contractors and owners, homeowners, transportation companies, retail stores and food service companies. UTC Climate, Controls & Security is also a global provider of security and fire safety products and services. In certain markets, UTC Climate, Controls & Security also provides monitoring and response services, to complement its electronic security and fire safety businesses. UTC Climate, Controls & Security products and services are used by governments, financial institutions, architects, building owners and developers, security and fire consultants, homeowners and other end-users requiring a high level of security and fire protection for their businesses and residences.

 

    Pratt  & Whitney —Pratt & Whitney supplies aircraft engines for the commercial, military, business jet and general aviation markets. Pratt & Whitney also provides fleet management services and aftermarket maintenance, repair and overhaul services, including the sale of spare parts and auxiliary power units. Pratt & Whitney produces and develops families of large engines for wide- and narrow-body and large regional aircraft in the commercial market and for fighter, bomber, tanker and transport aircraft in the military market. Pratt & Whitney’s products are sold principally to aircraft manufacturers, airlines and other aircraft operators, aircraft leasing companies and the U.S. and foreign governments.

 

    UTC Aerospace Systems —UTC Aerospace Systems is a global provider of technologically advanced aerospace products and aftermarket service solutions for aircraft manufacturers, airlines, regional, business and general aviation markets, military, space and undersea operations. UTC Aerospace Systems sells aerospace products to aircraft manufacturers, airlines and other aircraft operators, the U.S. and foreign governments, maintenance, repair and overhaul providers, and independent distributors.

For 2016, UTC’s commercial and industrial sales (generated principally by the commercial businesses) were approximately 50% of its consolidated sales, and its commercial aerospace sales and military aerospace sales (generated exclusively by its aerospace businesses) were approximately 38% and 12%, respectively, of its consolidated sales. International sales for 2016, including U.S. export sales, were 61% of its total segment sales.

 

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UTC’s principal executive offices are located at 10 Farm Springs Road, Farmington, Connecticut 06032 and its telephone number is (860) 728-7000. UTC’s website address is www.utc.com. Information contained on UTC’s website does not constitute part of this proxy statement/prospectus. UTC’s stock is publicly traded on the NYSE, under the ticker symbol “UTX.” Additional information about UTC is included in documents incorporated by reference in this proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 174.

Rockwell Collins

Rockwell Collins supplies cabin interior products and services to aircraft manufacturers and airlines, designs, produces and supports communications and aviation systems for commercial and military customers and provides information management services through voice and data communication networks and solutions worldwide. The integrated system solutions and products Rockwell Collins provides to its served markets are oriented around a set of core competencies: communications, navigation, automated flight control, displays/surveillance, simulation and training, integrated electronics and information management systems. Rockwell Collins also provides a wide range of services and support to its customers through a worldwide network of service centers, including equipment repair and overhaul, service parts, field service engineering, training, technical information services and aftermarket used equipment sales. The structure of Rockwell Collins’ business allows it to leverage these core competencies across markets and applications to bring high value solutions to its customers.

Rockwell Collins serves a worldwide customer base through its four operating segments: Interior Systems, Commercial Systems, Government Systems and Information Management Services. The Interior Systems business manufactures cabin interior products for the commercial aircraft and business aviation markets. The customer base consists of virtually all of the world’s major airlines and aerospace manufacturers. The Commercial Systems segment supplies aviation electronics systems, products and services, as well as aircraft cabin interior products, to customers located throughout the world. The customer base consists of original equipment manufacturers of commercial air transport, business and regional aircraft, commercial airlines and business aircraft operators. The Government Systems segment provides a broad range of electronic products, systems and services to customers including the U.S. Department of Defense, various ministries of defense, other government agencies and defense contractors around the world. These products, systems and services support airborne, precision weapon, ground and maritime applications on new equipment as well as in retrofit and upgrade applications designed to extend the service life and enhance the capability of existing aircraft, vehicle and weapon platforms. The Information Management Services segment provides communications services, systems integration and security solutions across the aviation, airport, rail and nuclear security markets to customers located around the world. The customer base includes commercial airlines, business aircraft operators, the U.S. Federal Aviation Administration (FAA), airport and critical infrastructure operators and major passenger and freight railroads.

Rockwell Collins serves a broad range of customers worldwide, including the U.S. Department of Defense, U.S. Coast Guard, civil agencies, airports, defense contractors, foreign ministries of defense, manufacturers of commercial helicopters, manufacturers of commercial air transport, business and regional aircraft, commercial airlines, fractional and other business jet operators, the FAA, critical infrastructure operators and major passenger and freight railroads. Rockwell Collins markets its systems, products and services directly to its customers through an internal marketing and sales force. In addition, it utilizes a worldwide dealer network to distribute its products and international sales representatives to assist with international sales and marketing. In 2016, various branches of the U.S. Government, both directly and indirectly through subcontracts, accounted for 33% of Rockwell Collins’ total sales.

Rockwell Collins’ executive offices are located at 400 Collins Road N.E., Cedar Rapids, Iowa 52498 and its telephone number is (319) 295-1000. Rockwell Collins’ website address is www.rockwellcollins.com. Information contained on Rockwell Collins’ website does not constitute part of this proxy statement/prospectus.

 

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Rockwell Collins’ stock is publicly traded on the NYSE, under the ticker symbol “COL.” Additional information about Rockwell Collins is included in documents incorporated by reference in this proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 174.

Riveter Merger Sub Corp.

Riveter Merger Sub Corp., a wholly owned subsidiary of UTC, is a Delaware corporation incorporated on August 30, 2017 for the purpose of effecting the merger. Riveter Merger Sub Corp. has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement. The principal executive offices of Riveter Merger Sub Corp. are located at 10 Farm Springs Road, Farmington, Connecticut 06032 and its telephone number is (860) 728-7000.

 

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THE MERGER

The following is a discussion of the merger between UTC and Rockwell Collins. The description of the merger agreement in this section and elsewhere in this proxy statement/prospectus is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A and is incorporated by reference into this proxy statement/prospectus. This summary does not purport to be complete and may not contain all of the information about the merger that is important to you. You are encouraged to read the merger agreement carefully and in its entirety. This section is not intended to provide you with any factual information about UTC or Rockwell Collins. Such information can be found elsewhere in this proxy statement/prospectus and in the public filings UTC and Rockwell Collins make with the SEC that are incorporated by reference into this document, as described in the section entitled “Where You Can Find More Information” beginning on page 174.

Background of the Merger

The Rockwell Collins Board and Rockwell Collins senior management periodically review and assess Rockwell Collins’ operations, financial performance and competitive position in the context of Rockwell Collins’ long-term strategic goals and plans. These reviews have included consideration, from time to time, of potential opportunities to enhance shareowner value. These assessments have also included discussions about the future of the aerospace industry and industry dynamics, including vertical integration initiatives on the part of major aircraft manufacturers and consolidation among participants in the aerospace industry. In the past, such reviews and assessments have resulted in business expansion through organic growth initiatives, acquisitions and other strategic transactions that support Rockwell Collins’ strategic goals and plans.

In 2016, Rockwell Collins began discussions with B/E Aerospace, Inc. (“B/E Aerospace”) regarding the potential acquisition of B/E Aerospace. These discussions led to negotiations, due diligence and other acquisition related activities from July 2016 until the announcement of Rockwell Collins’ merger agreement with B/E Aerospace on October 23, 2016.

On August 12, 2016, Mr. Robert K. (“Kelly”) Ortberg, Chairman, President and Chief Executive Officer of Rockwell Collins, met with the chief executive officer of Company A, a company in the aerospace industry. The chief executive officer of Company A described certain of Company A’s strategic plans and informed Mr. Ortberg that, consistent with those plans, Company A may have an interest in potentially acquiring Rockwell Collins. Company A did not indicate any price, other terms or timing of any such potential transaction. Mr. Ortberg responded that he would consult with the Rockwell Collins Board regarding Company A’s potential interest in acquiring Rockwell Collins.

On August 15, the executive committee of the Rockwell Collins Board met. Mr. Ortberg provided an update on the potential acquisition of B/E Aerospace. Mr. Ortberg also advised the committee about Company A’s expression of interest in a possible acquisition of Rockwell Collins. The executive committee discussed Company A’s potential interest in acquiring Rockwell Collins.

On September 2, the executive and strategy and finance committees of the Rockwell Collins Board held a joint meeting. Present at the meeting were members of Rockwell Collins senior management and representatives of J.P. Morgan Securities LLC (“J.P. Morgan”), Rockwell Collins’ financial advisor with respect to the potential acquisition of B/E Aerospace, and Skadden, Arps, Slate, Meagher & Flom, LLP (“Skadden”), Rockwell Collins’ legal counsel. Rockwell Collins senior management provided an update on the potential acquisition of B/E Aerospace. Mr. Ortberg reported on Company A’s possible interest in acquiring Rockwell Collins. Following discussion, the committees directed that Rockwell Collins proceed with the potential acquisition of B/E Aerospace and that Mr. Ortberg should inform Company A that Rockwell Collins had no interest at that time in pursuing discussions with Company A regarding a potential acquisition of Rockwell Collins.

 

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On September 9, Mr. Ortberg informed Company A’s chief executive officer of Rockwell Collins’ response to Company A’s possible interest in an acquisition of Rockwell Collins.

On September 14, the Rockwell Collins Board met for a regularly scheduled board meeting. Present at the meeting were members of Rockwell Collins senior management and representatives of J.P. Morgan and Skadden. Mr. Ortberg reported on Company A’s possible interest in acquiring Rockwell Collins and his communication of Rockwell Collins’ response to Company A’s chief executive officer. Representatives of Skadden reviewed with the Rockwell Collins Board its fiduciary duties under Delaware law in the context of a potential acquisition of B/E Aerospace as well as in the context of a potential proposal to acquire Rockwell Collins. Senior management provided an update on the potential acquisition of B/E Aerospace. The Rockwell Collins Board discussed the potential acquisition of B/E Aerospace and any interest Company A might have in a possible acquisition of Rockwell Collins. Following such discussions, the Rockwell Collins Board instructed senior management that Rockwell Collins should proceed with negotiations regarding the potential acquisition of B/E Aerospace and should not engage with Company A regarding any possible interest in acquiring Rockwell Collins.

On October 12, the Rockwell Collins Board met. Present at the meeting were members of Rockwell Collins senior management and representatives of J.P. Morgan and Skadden. Senior management reviewed in detail the potential acquisition of B/E Aerospace. Representatives of J.P. Morgan discussed J.P. Morgan’s preliminary financial analyses with respect to the transaction.

On October 21, the Rockwell Collins Board met. Present at the meeting were members of Rockwell Collins senior management and representatives of J.P. Morgan and Skadden. Senior management reported on the results of additional financial analysis and due diligence performed on B/E Aerospace and the status of negotiations. Representatives of J.P. Morgan reviewed J.P. Morgan’s financial analyses with respect to the proposed transaction. Following discussion, the Rockwell Collins Board unanimously approved the B/E Aerospace acquisition.

On October 23, 2016, B/E Aerospace and Rockwell Collins executed a merger agreement and issued a joint press release announcing the transaction.

On January 23, 2017, Mr. Gregory Hayes, Chairman, President and Chief Executive Officer of UTC, contacted Mr. Ortberg. Mr. Hayes requested a meeting with Mr. Ortberg to discuss potential business collaboration opportunities. On January 25, Mr. Ortberg responded to Mr. Hayes and declined the requested meeting in light of Rockwell Collins’ focus on closing its pending acquisition of B/E Aerospace.

On February 2, the Rockwell Collins Board held a regularly scheduled board meeting. Mr. Ortberg advised the board of UTC’s request for a meeting and his response.

On March 9, Rockwell Collins shareowners voted to approve the acquisition of B/E Aerospace, with more than 90% of all votes cast in favor of the transaction.

On April 11, representatives of Rockwell Collins and Company A met to discuss possible future commercial transactions between the two companies.

On April 13, Rockwell Collins completed its acquisition of B/E Aerospace.

On April 18, Mr. Hayes contacted Mr. Ortberg to request a meeting to discuss potential business collaboration opportunities. Later on April 18, at a regularly scheduled meeting of the strategy and finance committee of the Rockwell Collins Board, Mr. Ortberg discussed UTC’s request for a meeting. A meeting with UTC was subsequently scheduled for May 2, 2017.

On April 19, at a regularly scheduled meeting of the Rockwell Collins Board, Mr. Ortberg reported on the upcoming meeting with UTC.

 

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On May 2, representatives of Rockwell Collins and UTC met. UTC presented a high-level proposal for a transaction between UTC and Rockwell Collins for a strategic partnership involving all of Rockwell Collins’ businesses and UTC’s aerospace systems business pursuant to which UTC would own a majority of the partnership. Under UTC’s proposal, which would involve a change of control of Rockwell Collins, Rockwell Collins would continue to be a publicly traded company acting as a holding company with a minority ownership stake in the partnership, and Rockwell Collins shareowners would remain shareowners in that public company, receive an unspecified premium in the transaction and participate in the resulting synergies of the partnership. UTC would have a controlling voting interest in Rockwell Collins and thereby control of the Rockwell Collins Board and Mr. Ortberg would be designated as the partnership’s chief executive officer. UTC proposed that representatives of Rockwell Collins and UTC work to refine and develop the proposed transaction.

Following the presentation of UTC’s proposal, Rockwell Collins senior management worked with Skadden and J.P. Morgan to analyze and evaluate the proposed transaction.

On May 5, representatives of Rockwell Collins and Company A discussed certain possible future commercial transactions between the two companies.

On May 9, Rockwell Collins sent a draft confidentiality agreement with standstill provisions to UTC to facilitate further discussions about a possible transaction.

Beginning on May 10, representatives of Rockwell Collins and UTC negotiated the terms and conditions of the confidentiality agreement.

On May 11, the executive committee of the Rockwell Collins Board met. Mr. Ortberg reported on recent discussions with Company A and UTC, and the executive committee reviewed these parties’ interest in possible transactions with Rockwell Collins.

On May 22, as part of discussions on the draft confidentiality agreement between Rockwell Collins and UTC, Mr. Hayes contacted Mr. Ortberg and advised Mr. Ortberg that while UTC preferred the partnership structure it had proposed, UTC was prepared to consider the acquisition of Rockwell Collins, including if another acquiror of Rockwell Collins were to present itself.

Later on May 22, the executive committee of the Rockwell Collins Board met. Mr. Ortberg reported on the recent discussions with Company A and UTC. The executive committee discussed various considerations related to the potential matters with each of Company A and UTC. UTC’s indication that it would be prepared to consider the acquisition of Rockwell Collins was also discussed.

On May 24, Rockwell Collins and UTC entered into a mutual confidentiality agreement with standstill provisions in favor of Rockwell Collins.

On May 24, Mr. Ortberg met with Company A’s chief executive officer. They reviewed the recent discussions between the parties regarding possible commercial transactions. They also discussed Company A’s potential interest in an acquisition of Rockwell Collins, which was the first time since September 9, 2016 that any potential interest of Company A in such a transaction was discussed by the two parties. Later, in the course of these discussions, Company A’s chief executive officer indicated that, subject to further internal work, Company A intended to provide Rockwell Collins with a written indication of interest for Company A to acquire Rockwell Collins.

On May 26, the executive committee of the Rockwell Collins Board met. Mr. Ortberg reported on the recent discussions with Company A. The executive committee discussed Company A’s potential interest in acquiring Rockwell Collins.

 

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On May 31, the Rockwell Collins Board met. Present at the meeting were members of Rockwell Collins senior management and representatives of Skadden. Mr. Ortberg reported on the meeting with UTC on May 2, during which UTC outlined its proposal for a strategic partnership. He reported that UTC had later indicated it also would be prepared to consider the acquisition of Rockwell Collins. The proposed partnership was discussed, including that UTC’s proposal contemplated that Mr. Ortberg would serve as the chief executive officer of the partnership. Skadden discussed with the Rockwell Collins Board appropriate procedures for ongoing discussions between Mr. Ortberg and UTC. Mr. Ortberg reported on recent discussions with Company A and his meeting with its chief executive officer on May 24. Company A’s intent to submit a written indication of interest to acquire Rockwell Collins was discussed. Representatives of Skadden reviewed with the Rockwell Collins Board its fiduciary duties under Delaware law. Mr. Ortberg then reviewed planned next steps, including meeting with UTC to better understand its partnership proposal and preparing to appropriately respond to the anticipated indication of interest from Company A. The retention of J.P. Morgan as a financial advisor to Rockwell Collins in connection with a potential strategic transaction was also discussed, and J.P. Morgan began advising Rockwell Collins on June 28, 2017.

On June 6, representatives of Rockwell Collins and UTC met. UTC presented, and the parties discussed, the proposed strategic partnership, including structure, strategic rationale and a proposed process and timeline to develop more details regarding the proposal. UTC presented a hypothetical ownership structure for the partnership with Rockwell Collins shareowners having a 30% interest and UTC holding the remaining 70% interest. The presentation outlined value creation opportunities from anticipated synergies and set forth alternative scenarios by which Rockwell Collins shareowners would obtain additional consideration in the transaction in the form of a special cash dividend, additional equity in the partnership, or both, reflecting a total illustrative implied premium to Rockwell Collins shareowners, after taking into account the value of estimated synergies, of approximately 20%. UTC proposed that representatives of Rockwell Collins and UTC work to refine and develop the proposed transaction.

On June 28, the Rockwell Collins Board met for a regularly scheduled board meeting. Present at the meeting were members of Rockwell Collins senior management and representatives of J.P. Morgan and Skadden. Mr. Ortberg reported that Company A had not provided an indication of interest regarding the acquisition of Rockwell Collins and that he had had no further discussions with Company A’s chief executive officer since their meeting on May 24. Mr. Ortberg said that he would meet with Company A’s chief executive officer on June 30, and the Rockwell Collins Board instructed Mr. Ortberg to inquire as to the status of Company A’s indication of interest. Mr. Ortberg then updated the Rockwell Collins Board on discussions with UTC, including the June 6 meeting. Mr. Ortberg also reported on recent announcements at the Paris Air Show regarding vertical integration initiatives in the aerospace industry and related market responses. Senior management reviewed the market’s response to the acquisition of B/E Aerospace and recent consolidation activity in the aerospace industry. Representatives of J.P. Morgan reviewed with the Rockwell Collins Board the current aerospace industry landscape, including recent industry trends, supply chain consolidation, merger and acquisition activity and shareholder activism, and potential strategic combinations among major companies in the aviation industry and their potential impacts on Rockwell Collins. Senior management and the Rockwell Collins Board discussed the possible implications of changing industry conditions, including vertical integration initiatives, on Rockwell Collins and its prospects. Representatives of J.P. Morgan reviewed an assessment of certain potential acquirers of Rockwell Collins and their ability to acquire Rockwell Collins. They also included preliminary valuation perspectives on Rockwell Collins. Representatives of Skadden reviewed with the Rockwell Collins Board its fiduciary duties under Delaware law. Representatives of Skadden then outlined UTC’s proposed strategic partnership. They described how the proposed partnership would be formed and operate, and the governance provisions needed to safeguard the interests of Rockwell Collins shareowners in any such transaction. Following discussions with senior management, J.P. Morgan and Skadden, the Rockwell Collins Board expressed various concerns with UTC’s proposed strategic partnership, including the complexity of the structure and related governance provisions, the trading value of Rockwell Collins’ equity after formation of the partnership, Rockwell Collins shareowners’ lack of control over the partnership and the valuation of Rockwell Collins

 

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reflected by the proposal. The Rockwell Collins Board directed senior management to communicate these concerns to UTC.

On June 30, Company A’s chief executive officer informed Mr. Ortberg that Company A would not be providing an indication of interest to acquire Rockwell Collins at that time. Company A’s chief executive officer indicated that Company A desired to continue discussions of possible commercial transactions with Rockwell Collins.

Also on June 30, a representative of Rockwell Collins spoke with a representative of UTC and informed him of the Rockwell Collins Board’s concerns about the proposed strategic partnership.

On July 8, Mr. Hayes contacted Mr. Ortberg to inform him that UTC would be sending a written proposal to acquire Rockwell Collins. Later on July 8, Mr. Hayes sent Mr. Ortberg a written proposal to acquire Rockwell Collins for $130 per share, payable 50% in cash and 50% in UTC stock; however, the proposal did not describe the structure of the equity component, including whether the exchange ratio would be fixed or floating. The proposal indicated that if during due diligence UTC identified incremental value, UTC was open to reflecting that additional value in a revised proposal. The proposal was subject to satisfactory completion of due diligence, negotiation of a definitive merger agreement and approval of UTC’s board of directors. The proposal stated that a transaction would not be subject to a financing contingency.

On July 9, Rockwell Collins senior management and representatives of Skadden and J.P. Morgan met to review UTC’s proposal.

On July 12, the Rockwell Collins Board met. Present at the meeting were members of Rockwell Collins senior management and representatives of J.P. Morgan and Skadden. Mr. Ortberg reported on his conversation with Company A’s chief executive officer on June 30. The Rockwell Collins Board discussed with senior management possible commercial transactions with Company A. Mr. Ortberg reported on conversations with representatives of UTC and receipt of UTC’s proposal to acquire Rockwell Collins for $130 per share, payable 50% in cash and 50% in UTC stock. The implications of vertical integration activity in the aerospace industry were considered. Representatives of Skadden reviewed for the Rockwell Collins Board its fiduciary duties under Delaware law. Representatives of Skadden then discussed with the board UTC’s prior expressed interest in the context of its proposed strategic partnership in retaining Mr. Ortberg to be the chief executive officer of the partnership. The Rockwell Collins Board discussed Mr. Ortberg’s anticipated involvement in any process to consider UTC’s proposal to acquire Rockwell Collins and related negotiations. Following discussion, the Rockwell Collins Board instructed Mr. Ortberg not to engage in discussions with UTC regarding continuing employment (and any compensation and other employment terms), unless and until such time that the Rockwell Collins Board had agreed on the key terms of any such transaction and had given Mr. Ortberg permission to discuss employment matters. The Rockwell Collins Board also instructed Mr. Ortberg to keep the board and/or the lead independent director promptly informed of ongoing negotiations with UTC and directed that the financial and legal advisors monitor negotiations with UTC to ensure compliance with the board’s instructions. Representatives of J.P. Morgan discussed J.P. Morgan’s preliminary financial analyses with respect to UTC’s proposal, which included analyses based on Rockwell Collins’ 2016 five-year plan. Senior management reviewed the ongoing process to prepare the 2017 five-year plan and the general risks and opportunities associated with achieving the financial forecasts. Representatives of J.P. Morgan reviewed potential acquisitions that Rockwell Collins might pursue to enhance shareowner value as an independent company, including with respect to actionability and the potential incremental value that might be created. The Rockwell Collins Board then discussed with senior management, J.P. Morgan and Skadden other strategic parties that might be interested in acquiring Rockwell Collins. Following discussion, the Rockwell Collins Board directed Mr. Ortberg to inform UTC that the board would continue to review UTC’s proposal and respond the following week. The Rockwell Collins Board also determined that Company A and Company B, a company in the aerospace industry, were the strategic parties most likely to be able to complete an acquisition of Rockwell Collins at a valuation at or above the price proposed by UTC. The Rockwell Collins Board directed Rockwell Collins senior management to contact such parties regarding their interest in a possible acquisition of Rockwell Collins.

 

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On July 13, Mr. Ortberg spoke with Company A’s chief executive officer and inquired as to Company A’s interest in a possible acquisition of Rockwell Collins. Company A’s chief executive officer informed Mr. Ortberg that Company A remained focused on evaluating possible commercial transactions with Rockwell Collins and did not intend to make a proposal to acquire Rockwell Collins at that time.

Also on July 13, Mr. Ortberg contacted Mr. Hayes and informed him when the Rockwell Collins Board expected to respond to UTC’s proposal.

On July 17, Mr. Ortberg spoke with a representative of Company B as to its interest in a potential acquisition of Rockwell Collins. Company B indicated it would consider the matter and then respond. Following this conversation, representatives of Company B had discussions with a representative of Rockwell Collins regarding the timing and process for the Rockwell Collins Board’s evaluation of strategic options.

On July 20, the Rockwell Collins Board met. Present at the meeting were members of Rockwell Collins senior management and representatives of J.P. Morgan and Skadden. Mr. Ortberg reported on the recent conversations with UTC, Company A and Company B. Senior management then presented Rockwell Collins’ preliminary 2017 five-year plan reflecting work performed to date. They discussed with the Rockwell Collins Board the risks and opportunities during the plan period in light of current industry conditions. The Rockwell Collins Board requested additional information regarding the preliminary 2017 five-year plan assumptions and other matters. Representatives of J.P. Morgan then presented J.P. Morgan’s preliminary financial analyses with respect to UTC’s proposal, which included analyses based on the Rockwell Collins’ preliminary 2017 five-year plan reviewed at the meeting. Following discussion, the Rockwell Collins Board directed Mr. Ortberg to inform UTC that its $130 per share proposal was not sufficient for Rockwell Collins to engage in discussions regarding a potential transaction.

On July 20, Mr. Ortberg contacted Mr. Hayes and informed him of the Rockwell Collins Board’s position with respect to UTC’s proposal. During that conversation, Mr. Hayes increased UTC’s proposal to $135 per share, payable 50% in cash and 50% in UTC stock.

On July 23, the executive committee of the Rockwell Collins Board met. Present at the meeting were members of Rockwell Collins senior management and representatives of J.P. Morgan and Skadden. Mr. Ortberg reported on his recent conversation with Mr. Hayes and UTC’s increase in its proposal to $135 per share. Mr. Ortberg also reported that no further communications with Company B had occurred.

On July 24, Rockwell Collins retained Citigroup Global Markets, Inc. (“Citigroup”) as a financial advisor in connection with a potential transaction, pursuant to an existing arrangement with Citigroup, which had been previously reviewed by the Rockwell Collins Board.

On July 26, Company A contacted Rockwell Collins seeking to resume discussions regarding possible commercial transactions.

Also on July 26, the Rockwell Collins Board met. Present at the meeting were members of Rockwell Collins senior management and representatives of J.P. Morgan and Skadden. Senior management reviewed in detail the assumptions used for the preliminary 2017 five-year plan and the risks and opportunities for the plan. Mr. Ortberg reported on UTC’s revised $135 per share proposal, payable 50% in cash and 50% in UTC stock. He also reported that he anticipated a response shortly from Company B regarding its interest in pursuing a potential transaction. Representatives of Skadden reviewed with the Rockwell Collins Board its fiduciary duties under Delaware law. Representatives of J.P. Morgan discussed J.P. Morgan’s preliminary financial analyses with respect to UTC’s revised $135 per share proposal. Following discussion, the Rockwell Collins Board instructed Mr. Ortberg to inform UTC that the board had no interest in a cash and stock transaction at $135 per share, but that Rockwell Collins management was authorized to meet with UTC to review potential synergies from a transaction and discuss Rockwell Collins’ future prospects to provide UTC with a better understanding of the

 

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value creation in a combination of the two companies so that UTC would be in a position to increase the consideration it would offer in a potential acquisition.

Later on July 26, Mr. Ortberg contacted Mr. Hayes and informed him of the Rockwell Collins Board’s position with respect to UTC’s revised proposal.

On July 28, UTC sent Rockwell Collins an outline of topics to be covered in a requested management presentation by Rockwell Collins to UTC. Representatives of Rockwell Collins and UTC discussed the outline and proposed presentation.

Also on July 28, Company B contacted Rockwell Collins to inform it that Company B would not pursue a potential transaction with Rockwell Collins at that time.

On August 4, news sources reported that UTC was considering a possible acquisition of Rockwell Collins. Thereafter, throughout August, various news sources, citing unnamed sources, reported on a possible transaction between Rockwell Collins and UTC, including the purported financial terms of the potential transaction and the status of the parties’ discussions. Neither Rockwell Collins nor UTC commented on these news reports.

On August 6, UTC sent Rockwell Collins a request for certain due diligence items.

On August 7, noting rumors and press speculation about UTC acquiring Rockwell Collins, Company A’s chief executive officer contacted Mr. Ortberg. Mr. Ortberg did not comment on the rumors or press speculation. Company A’s chief executive officer informed Mr. Ortberg that Company A would not make an acquisition proposal at that time and preferred to continue to explore possible commercial transactions with Rockwell Collins.

Also on August 7, representatives of Rockwell Collins and UTC met. Rockwell Collins senior management discussed the potential synergies that they believed could be achieved in the combination of Rockwell Collins and UTC. Following the meeting, senior management of Rockwell Collins agreed to provide certain limited due diligence materials to UTC and its advisors and to facilitate discussions.

On August 10, Wachtell, Lipton, Rosen and Katz (“Wachtell Lipton”), counsel to UTC, provided Skadden with a draft merger agreement, which included a proposed termination fee payable by Rockwell Collins in certain circumstances of 3.5% of the Rockwell Collins equity value in the transaction.

Beginning on August 10, Rockwell Collins made available to UTC certain due diligence materials and participated in due diligence conference calls.

On August 11, the executive committee of the Rockwell Collins Board met. Present at the meeting were members of Rockwell Collins senior management and representatives of J.P. Morgan, Citigroup and Skadden. Mr. Ortberg reported that Citigroup had been retained by Rockwell Collins in connection with a potential transaction. Mr. Ortberg reported on further vertical integration initiatives in the aerospace industry and discussed the potential implications of such initiatives on Rockwell Collins. Mr. Ortberg also reported on the meeting with UTC on August 7. He said management was continuing to update the 2017 five-year plan and would review revisions to the plan with the Rockwell Collins Board at a meeting the following week. Mr. Ortberg reported on Company B’s determination not to pursue a potential acquisition of Rockwell Collins at this time. Mr. Ortberg also described his conversation on August 7 with Company A’s chief executive officer.

On August 17, Company B contacted Rockwell Collins to suggest that the parties evaluate a possible investment in Rockwell Collins by Company B. Company B did not propose any valuation or other specific terms related to the possible investment. Given that Rockwell Collins was not seeking a strategic investment, the conceptual nature of Company B’s suggestion and the ongoing discussion with UTC regarding a possible transaction, Rockwell Collins was not interested in pursuing the possible investment and subsequently informed Company B of this decision.

 

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On August 18, the Rockwell Collins Board met. Present at the meeting were members of Rockwell Collins senior management and representatives of J.P. Morgan, Citigroup and Skadden. Mr. Ortberg reported on vertical integration initiatives in the aerospace industry and discussed potential implications for Rockwell Collins. Mr. Ortberg reported on Company B’s determination that it would not pursue a potential acquisition of Rockwell Collins at this time. Mr. Ortberg reported on the meeting with UTC on August 7 and the intention to meet again with UTC following a further review with the Rockwell Collins Board of the 2017 five-year plan. He also described his conversation with Company A’s chief executive officer on August 7. Senior management presented the 2017 five-year plan (as described in “—Certain Rockwell Collins Unaudited Prospective Financial Information”) and then discussed with the Rockwell Collins Board the plan, the plan assumptions, the risks and opportunities for the plan and the differences between the current 2017 five-year plan and the earlier version presented to the Rockwell Collins Board. Representatives of J.P. Morgan and Citigroup discussed their respective preliminary financial analyses with respect to UTC’s revised proposal, which included analyses based on the 2017 five-year plan (as described in “—Certain Rockwell Collins Unaudited Prospective Financial Information”).

On August 20, representatives of Rockwell Collins and UTC met. Rockwell Collins senior management presented Rockwell Collins’ 2017 five-year plan, and the parties discussed various financial, operational and legal information relating to Rockwell Collins.

On August 22, UTC submitted a revised written proposal to acquire Rockwell Collins for $139 per share (based on the closing price of UTC common stock on August 22, 2017), payable 60% in cash and 40% in UTC stock. Under this proposal, Rockwell Collins shareowners would receive per share consideration of $83.40 in cash and a fixed exchange ratio of 0.48059 shares of UTC common stock. The proposal was subject to satisfactory completion of due diligence, negotiation of a definitive merger agreement and approval of the UTC Board. The proposal stated that a transaction would not be subject to a financing contingency.

On August 23, the Rockwell Collins Board met. Present at the meeting were members of Rockwell Collins senior management and representatives of J.P. Morgan, Citigroup and Skadden. Mr. Ortberg reviewed UTC’s revised proposal of $139 per share, payable 60% in cash and 40% in UTC stock, with a fixed exchange ratio for the stock portion of the consideration (which would not adjust for changes in the market price of UTC common stock prior to completion of the merger). Representatives of Skadden reviewed with the Rockwell Collins Board its fiduciary duties under Delaware law. Representatives of J.P. Morgan and Citigroup discussed their respective preliminary financial analyses and other transaction considerations with respect to UTC’s revised proposal. Following discussion, the Rockwell Collins Board determined that while the board was not prepared to accept UTC’s revised proposal, it was at an acceptable level of value to warrant further negotiations. The Rockwell Collins Board then authorized management to move forward with negotiations with UTC to increase the price and safeguard the value of the potential stock consideration payable at closing. The Rockwell Collins Board also directed management and the advisors to engage in due diligence of UTC and to negotiate the terms of a merger agreement for the proposed transaction.

Later on August 23, Mr. Ortberg contacted Mr. Hayes and informed him of the Rockwell Collins Board’s position with respect to UTC’s revised proposal. The parties agreed that their respective representatives and advisors would meet to continue discussions regarding the terms of a potential transaction.

On August 24, Skadden sent Wachtell Lipton a revised draft of the merger agreement.

Beginning on August 24 and continuing through September 4, Rockwell Collins made available to UTC additional due diligence materials and participated in additional due diligence conference calls.

On August 24, representatives of Rockwell Collins and UTC and their respective legal and financial advisors met. They discussed various terms of a proposed transaction, including the mix of cash and stock consideration, a fixed or floating exchange ratio, UTC’s committed financing at signing, certain matters related to obtaining required regulatory approvals, termination fee and expense reimbursement provisions, and Rockwell

 

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Collins’ due diligence requirements for UTC. At the conclusion of these discussions, UTC requested that Rockwell Collins respond in a comprehensive manner to UTC’s August 22 proposal.

On August 24 and August 25, Rockwell Collins senior management and representatives of Skadden, J.P. Morgan and Citigroup discussed potential responses to UTC’s proposal.

On August 25, a representative of Rockwell Collins responded to UTC’s proposal with two alternative counter-proposals that Rockwell Collins senior management would be prepared to recommend to the Rockwell Collins Board: one in which Rockwell Collins would be acquired for $141 per share in cash and one in which Rockwell Collins would be acquired for $144 per share, payable 70% in cash and 30% in UTC stock, with a floating exchange ratio for the stock portion of such consideration subject to a two-way 10% collar mechanism. Both alternatives contemplated that UTC would obtain committed financing at signing for sufficient cash to complete the transaction, a break-up fee payable by Rockwell Collins in certain circumstances of 3% of the equity value of the transaction and the reimbursement of up to $50 million of UTC transaction expenses following termination of the merger agreement due to the failure of the merger to be approved by Rockwell Collins shareowners. The alternative involving UTC stock would also be subject to Rockwell Collins’ satisfactory completion of due diligence on UTC.

Later on August 25, a representative of UTC contacted a representative of Rockwell Collins and rejected both of Rockwell Collins’ counter-proposals and indicated that, based on the two counter-proposals, there did not appear to be a basis for further discussions between the parties regarding a possible transaction.

On August 26, UTC’s financial advisor contacted a Rockwell Collins financial advisor to offer a management presentation by UTC to Rockwell Collins in furtherance of Rockwell Collins’ due diligence requirements. The parties agreed that their respective representatives and advisors would meet. Further discussion on the economic terms of UTC’s August 22 proposal would be deferred pending the outcome of that meeting. Later on August 26, Wachtell Lipton sent Skadden a revised draft of the merger agreement.

On August 28 and 29, representatives of Rockwell Collins and UTC and their respective legal and financial advisors met. At the meetings, senior management of UTC made a presentation on UTC’s operations and outlook, and the parties and their financial advisors discussed various financial and operational information relating to UTC. The parties and their respective legal and financial advisors negotiated various terms of the proposed transaction. Mr. Hayes inquired of Mr. Ortberg’s willingness to lead the combined company’s aerospace systems business. Mr. Ortberg indicated his willingness to serve in that capacity, but Mr. Hayes and Mr. Ortberg did not discuss any terms or conditions of Mr. Ortberg’s potential post-transaction employment with UTC.

Over the course of August 28 and 29, Rockwell Collins senior management and representatives of Skadden, J.P. Morgan and Citigroup discussed responses to UTC’s proposal, taking into account, among other things, the progress being made in the meetings between the parties, including with respect to the legal and other terms of the proposed transaction. Mr. Ortberg also consulted with the lead independent director of the Rockwell Collins Board regarding possible responses.

Following such discussions and consultations, on August 29, Mr. Ortberg informed Mr. Hayes that he would be prepared to recommend to the Rockwell Collins Board a transaction in which UTC would acquire Rockwell Collins for $141 per share, payable 70% in cash and 30% in stock, with a floating exchange ratio for the stock portion of such consideration subject to a two-way 10% collar mechanism. Representatives of Rockwell Collins and UTC then discussed the reference stock price that would be used to set the collar mechanism. Later on August 29, Mr. Hayes informed Mr. Ortberg that UTC was prepared to increase its proposal to acquire Rockwell Collins to $140 per share, payable 2/3 in cash and 1/3 in UTC common stock, with a floating exchange ratio for the stock portion of such consideration subject to a two-way 7.5% collar mechanism based on a reference UTC stock price of $115.69 (the closing price of UTC common stock on August 22, 2017). Mr. Hayes indicated that the proposal was UTC’s best and final proposal to acquire Rockwell Collins.

 

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Also on August 29, Skadden sent Wachtell Lipton a revised draft of the merger agreement.

Between August 29 and September 4, representatives and advisors of Rockwell Collins and UTC continued to negotiate the terms of the merger agreement. UTC and Rockwell Collins, and their respective representatives and advisors, also conducted additional due diligence on Rockwell Collins and UTC, respectively.

On September 1, the Rockwell Collins Board met. Present at the meeting were members of Rockwell Collins senior management and representatives of J.P. Morgan, Citigroup and Skadden. Mr. Ortberg reported on discussions with UTC, including UTC’s latest $140 per share cash and stock offer. He reported that if the Rockwell Collins Board determined to move forward with the transaction, UTC intended to name the combined aerospace systems business “Collins Aerospace Systems” and that he had been asked to run the combined business (but that no terms and conditions of his employment had been discussed). Senior management provided an overview of the proposed transaction and a report on the due diligence review of UTC. Representatives of Skadden reviewed with the Rockwell Collins Board its fiduciary duties under Delaware law. Representatives of Skadden then summarized the terms and conditions of the merger agreement and UTC’s financing commitment papers. Representatives of J.P. Morgan presented J.P. Morgan’s preliminary financial analyses with respect to the proposed transaction. Representatives of Citigroup presented Citigroup’s preliminary financial analyses with respect to the proposed transaction. Representatives of J.P. Morgan and Citigroup each separately reviewed with the Rockwell Collins Board their past business relationships with parties related to the proposed transaction, which disclosure had previously been provided to Rockwell Collins. Senior management then reported on various general employee compensation and retention matters related to the proposed transaction. Mr. Ortberg reviewed the proposed communications plan and potential next steps in the event that the Rockwell Collins Board determined to move forward with the proposed transaction.

On September 4, the Rockwell Collins Board met. Present at the meeting were members of Rockwell Collins senior management and representatives of J.P. Morgan, Citigroup and Skadden. Representatives of Skadden reviewed the terms and conditions of the merger agreement. Representatives of J.P. Morgan reviewed J.P. Morgan’s financial analyses with respect to the proposed transaction and rendered J.P. Morgan’s oral opinion that, as of such date and based upon and subject to the factors and assumptions set forth in its written opinion, the consideration to be paid to the holders of Rockwell Collins common stock (other than excluded shares) in the merger was fair, from a financial point of view, to such holders. The oral opinion was subsequently confirmed in writing by delivery of J.P. Morgan’s written opinion dated September 4, 2017. Representatives of Citigroup reviewed Citigroup’s financial analyses with respect to the proposed transaction and rendered Citigroup’s oral opinion that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications set forth in its written opinion, the merger consideration to be received by the holders of outstanding shares of common stock of Rockwell Collins (other than excluded shares) in the merger was fair, from a financial point of view, to such holders. The oral opinion was subsequently confirmed in writing by delivery of Citigroup’s written opinion dated September 4, 2017. After discussion, the Rockwell Collins Board unanimously approved the merger agreement and the transactions contemplated by the merger agreement, determined that the merger agreement and the transactions contemplated by the merger agreement were advisable and in the best interests of Rockwell Collins and its shareowners and resolved, subject to the terms of the merger agreement, to recommend that Rockwell Collins shareowners adopt the merger agreement and approve the merger.

Rockwell Collins and UTC executed the merger agreement during the early evening on September 4, 2017. That same evening, Rockwell Collins and UTC issued a press release announcing entry into the merger agreement.

Rockwell Collins Board of Directors’ Recommendation and Reasons for the Merger

On September 4, 2017, the Rockwell Collins Board unanimously (1) approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement; (2) determined that the merger

 

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agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of Rockwell Collins and Rockwell Collins shareowners; (3) directed that the merger proposal be submitted to a vote of Rockwell Collins shareowners; and (4) recommended that the shareowners of Rockwell Collins vote “ FOR ” the merger proposal.

In evaluating the merger agreement and the transactions contemplated by the merger agreement, the Rockwell Collins Board consulted with Rockwell Collins’ management and legal and financial advisors. In recommending that Rockwell Collins shareowners vote their shares of common stock in favor of the merger proposal, the Rockwell Collins Board considered a number of factors, including the following (not necessarily listed in order of relative importance):

 

    Rockwell Collins’ business and operations and its current and historical financial condition and results of operations;

 

    Rockwell Collins’ strategic plan and related financial projections and the risks and uncertainties in executing on the strategic plan and achieving such financial projections, including risks related to vertical integration initiatives in the aerospace industry, consolidation and increased competition among participants in the aerospace industry, cost cutting and supplier margin reduction efforts initiated by Rockwell Collins’ major customers, current industry dynamics and the future of the aerospace industry generally, and the “risk factors” set forth in Rockwell Collins’ Annual Report on Form 10-K for the fiscal year ended September 30, 2016 and subsequent reports filed with the SEC;

 

    The perceived risks of continuing as a standalone public company and the assessment that no other alternatives were reasonably likely in the near term to create greater value for Rockwell Collins shareowners than the merger, taking into account business, competitive, industry and market risks;

 

    The historic trading ranges of Rockwell Collins common stock and the potential trading range of Rockwell Collins common stock absent announcement of the merger agreement and press speculation about a possible acquisition;

 

    Various analyses as to the valuation of Rockwell Collins as an independent company;

 

    The implied value of the merger consideration at the offer price of $140 per share of Rockwell Collins stock represents:

 

    a 25% premium to Rockwell Collins’ last unaffected closing share price of $112.36 as of August 2, 2017;

 

    a 23% premium to Rockwell Collins’ last unaffected all-time high closing share price of $113.73 as of July 28, 2017;

 

    a 31% premium to Rockwell Collins’ last unaffected trailing three month volume-weighted average price of $106.77 as of August 2, 2017;

 

    a 66% premium to Rockwell Collins’ closing share price prior to the announcement of the B/E Aerospace transaction of $84.46 as of October 21, 2016; and

 

    a multiple of 15.0 times Rockwell Collins’ projected 2017 pro forma EBITDA (which assumes a full year of contribution from B/E Aerospace and gives effect to annualized synergies recognized since the closing of the B/E Aerospace acquisition);

 

    The fact that a substantial portion of the merger consideration consists of cash, providing Rockwell Collins shareowners with certainty of value and liquidity upon completion of the merger for such portion of the consideration, along with a significant stock component, which provides Rockwell Collins shareowners with participation in the upside potential of a larger, more diversified company;

 

    The historic trading ranges of UTC common stock;

 

   

The fact that the stock portion of the merger consideration is based upon a floating exchange ratio and subject to a $107.01 to $124.37 collar range, which provides protection against a downward movement

 

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in the market price of UTC common stock within the range of the collar prior to completion of the merger;

 

    The fact that the value of the merger consideration payable to Rockwell Collins shareowners could increase in the event that the UTC stock price increases above the high end of the collar of $124.37 prior to completion of the merger;

 

    The separate written opinions of each of J.P. Morgan and Citigroup, delivered to the Rockwell Collins Board on September 4, 2017, that, as of such date and based upon and subject to the factors and assumptions set forth in such opinions, the merger consideration to be paid to the holders of Rockwell Collins common stock (other than excluded shares) in the merger was fair, from a financial point of view, to such holders, each as more fully described below under the caption “—Opinions of Rockwell Collins’ Financial Advisors” beginning on page 66. The full text of the separate written opinions of J.P. Morgan and Citigroup, each dated September 4, 2017, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications on the reviews undertaken in rendering the separate J.P. Morgan and Citigroup opinions, are attached as Annex B and Annex C, respectively, to this proxy statement/prospectus, and are incorporated herein by reference;

 

    The fact that Company A and Company B, the two parties the Rockwell Collins Board thought most likely to be able to complete an acquisition of Rockwell Collins at a valuation competitive with UTC’s proposals, decided not to engage in discussions of a possible acquisition of Rockwell Collins;

 

    Rockwell Collins’ ability under the merger agreement, subject to certain conditions, to provide information to and engage in discussions or negotiations with third parties that make unsolicited bona fide written alternative acquisition proposals;

 

    That if Rockwell Collins were to receive an alternative acquisition proposal from a third party that the Rockwell Collins Board determines is reasonably likely to lead to a superior proposal, under the merger agreement, the Rockwell Collins Board would be able, subject to certain conditions, to consider such superior proposal and change its recommendation that Rockwell Collins shareowners vote in favor of the merger proposal and/or terminate the merger agreement in order to pursue such superior proposal;

 

    The ability under the merger agreement for the Rockwell Collins Board, subject to certain conditions, to change its recommendation in favor of the merger in response to an intervening event if the board determines that failure to take such action would be inconsistent with its fiduciary duties;

 

    The other termination provisions contained in the merger agreement, including the fact that the Rockwell Collins Board believed that the termination fee of $695 million is reasonable in light of, among other things, the benefits of the merger to Rockwell Collins shareowners, the typical size of such fees in similar transactions and the likelihood that such a fee would not preclude or unreasonably restrict the emergence of alternative acquisition proposals;

 

    The likelihood that UTC would complete the merger taking into account (1) the committed debt financing UTC obtained in connection with the merger and UTC’s financial condition and ability to fund the cash merger consideration, and (2) the commitment by UTC to obtain applicable consents and approvals under antitrust laws and assume the risks related to certain conditions and requirements that may be imposed by regulators in connection with securing such consents and approvals up to specified thresholds and limitations;

 

    The Rockwell Collins Board’s knowledge of UTC, taking into account publicly available information regarding UTC and the results of Rockwell Collins’ due diligence review of UTC;

 

    The expectation that the combined company would achieve approximately in excess of $500 million of run-rate pre-tax cost synergies and that the merger would be accretive to UTC’s adjusted earnings per share in the first full fiscal year following the completion of the merger, thereby supporting the value of the stock portion of the consideration received by Rockwell Collins shareowners;

 

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    The conditions to the closing in the merger agreement and the fact that there is no condition regarding financing;

 

    The fact that the merger agreement was the product of arm’s-length negotiations and contained terms and conditions that are, in the Rockwell Collins Board’s view, favorable to Rockwell Collins and its shareowners;

 

    The fact that the merger agreement was unanimously approved by the Rockwell Collins Board, which is comprised of a majority of independent directors who are not affiliated with UTC and are not employees of Rockwell Collins or any of its subsidiaries, and which received advice from Rockwell Collins’ financial and legal advisors in evaluating, negotiating and recommending the terms of the merger agreement;

 

    The condition to completing the merger that the merger must be approved by the holders of a majority of the outstanding shares of Rockwell Collins common stock, and the absence of any stock voting commitments by management or other shareowners, so that shareowners will have the right to approve or disapprove of the merger;

 

    Rockwell Collins’ ability to specifically enforce UTC’s obligations under the merger agreement, including UTC’s obligations to complete the merger; and

 

    The availability of appraisal rights to Rockwell Collins shareowners who comply with specified procedures under Delaware law.

The Rockwell Collins Board also considered a number of uncertainties, risks and other factors in its deliberations concerning the merger and the other transactions contemplated by the merger agreement, including the following (not necessarily listed in order of relative importance):

 

    The fact that Rockwell Collins shareowners would forgo the opportunity to realize the potential long-term value of the successful execution of Rockwell Collins’ current strategy as an independent company;

 

    The fact that the value of the merger consideration payable to Rockwell Collins shareowners could decrease in the event that the UTC stock price decreases below the low end of the collar of $107.01 prior to completion of the merger;

 

    The fact that, under specified circumstances, Rockwell Collins may be required to pay a $695 million termination fee or reimburse certain of UTC’s expenses in the event the merger agreement is terminated and the effect this could have on Rockwell Collins, including:

 

    The possibility that the termination fee payable by Rockwell Collins to UTC upon the termination of the merger agreement under certain circumstances could discourage some potential acquirors from making an alternative acquisition proposal, although the Rockwell Collins Board believes that the termination fee is reasonable in amount and would not unduly deter any other party that might be interested in acquiring Rockwell Collins; and

 

    The risk that Rockwell Collins will be required to reimburse UTC for its expenses up to $50 million if the merger agreement is terminated by either party because the Rockwell Collins shareowners do not approve the merger proposal;

 

    The significant costs involved in connection with entering into and completing the merger and the substantial time and effort of management required to complete the merger, which could disrupt Rockwell Collins’ business operations and its continuing integration of B/E Aerospace;

 

   

The impact of the announcement, pendency or completion of the merger, or the failure to complete the merger, on Rockwell Collins’ relationships with its employees (including making it more difficult to attract and retain key personnel and the possible loss of key management, technical and other personnel), customers and suppliers (including as a result of customer or other contracts with

 

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provisions that require consent for, or have implications upon, a change of control of Rockwell Collins);

 

    The restrictions in the merger agreement on Rockwell Collins’ conduct of business prior to completion of the merger, which could delay or prevent Rockwell Collins from undertaking business opportunities that may arise, or taking other actions with respect to its operations that the Rockwell Collins Board and management might believe were appropriate or desirable;

 

    The fact that the completion of the merger would require approval under or expiration or termination of the applicable waiting periods under the HSR Act and other applicable antitrust laws, the risk that regulatory agencies may not approve the merger or may impose terms and conditions on their approvals that exceed the thresholds and limitations that UTC agreed to in the merger agreement or otherwise adversely affect the business and financial results of the combined company, and the amount of time that might be required to obtain all required regulatory consents and approvals;

 

    The fact that if the merger is not completed as a result of regulatory impediments or other reasons, UTC will not be obligated to pay any “reverse termination fee”;

 

    The fact that receipt of the merger consideration would be taxable to Rockwell Collins shareowners that are treated as U.S. holders for U.S. federal income tax purposes;

 

    The fact that while Rockwell Collins expects the merger to be completed if the merger proposal is approved by Rockwell Collins shareowners, there can be no assurance that all conditions to the parties’ obligations to complete the merger will be satisfied;

 

    The risk that the Rockwell Collins shareowners do not approve the merger proposal;

 

    The fact that the market price of Rockwell Collins common stock could be affected by many factors if the merger agreement were terminated, including: (1) if the merger agreement is terminated, the reason or reasons for such termination and whether such termination resulted from factors adversely affecting Rockwell Collins; (2) the possibility that as a result of the termination of the merger agreement possible acquirors may consider Rockwell Collins to be a less attractive acquisition candidate; and (3) the possible sale of Rockwell Collins common stock by short-term investors following an announcement that the merger agreement was terminated;

 

    The challenges inherent in the combination of two businesses of the size and complexity of Rockwell Collins and UTC, and the risks of not being able to realize all of the anticipated synergies and other anticipated benefits of the merger;

 

    The risk of litigation, injunctions or other legal proceedings related to the transaction; and

 

    The risks of the type and nature described under “Risk Factors,” beginning on page 39 and the matters described under “Cautionary Note Regarding Forward-Looking Statements” beginning on page 37.

The Rockwell Collins Board believed that, overall, the potential benefits of the merger to Rockwell Collins shareowners outweighed the risks and uncertainties of the merger.

This discussion of the information and factors considered by the Rockwell Collins Board in reaching its conclusions and recommendation includes the principal factors considered by the Rockwell Collins Board, but is not intended to be exhaustive and may not include all of the factors considered by the Rockwell Collins Board. In view of the wide variety of factors considered in connection with its evaluation of the merger and the other transactions contemplated by the merger agreement, and the complexity of these matters, the Rockwell Collins Board did not find it useful and did not attempt to quantify, rank or assign any relative or specific weights to the various factors that it considered in reaching its determination to approve the merger and the other transactions contemplated by the merger agreement, and to make its recommendation to Rockwell Collins shareowners. Rather, the Rockwell Collins Board viewed its decisions as being based on the totality of the information presented to it and the factors it considered, including its discussions with, and questioning of, members of

 

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Rockwell Collins’ management and Rockwell Collins’ advisors, as well as its experience and history. In addition, individual members of the Rockwell Collins Board may have assigned different weights to different factors.

Certain of Rockwell Collins’ directors and executive officers have interests in the merger that are different from, or in addition to, those of Rockwell Collins shareowners generally. The Rockwell Collins Board was aware of and considered these potential interests, among other matters, in evaluating the merger and in making its recommendation to Rockwell Collins shareowners. For a discussion of these interests, see “—Interests of Directors and Executive Officers of Rockwell Collins in the Merger” beginning on page 84.

The Rockwell Collins Board unanimously determined that the merger agreement and the transactions contemplated by the merger agreement were advisable and in the best interests of Rockwell Collins and its shareowners and approved the merger agreement. Accordingly, the Rockwell Collins Board unanimously recommends that Rockwell Collins shareowners vote “ FOR ” the merger proposal at the Rockwell Collins special meeting.

Opinions of Rockwell Collins’ Financial Advisors

Opinion of J.P. Morgan

Pursuant to an engagement letter dated September 1, 2017 with an effective date of June 28, 2017, Rockwell Collins retained J.P. Morgan as its financial advisor in connection with the merger.

At the meeting of the Rockwell Collins Board on September 4, 2017, J.P. Morgan rendered its oral opinion to the Rockwell Collins Board that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the consideration to be paid to holders of Rockwell Collins common stock (other than excluded shares) in the merger was fair, from a financial point of view, to such holders. J.P. Morgan confirmed its September 4, 2017 oral opinion by delivering its written opinion to the Rockwell Collins Board, dated September 4, 2017, that, as of such date, the consideration to be paid to holders of Rockwell Collins common stock (other than excluded shares) in the merger was fair, from a financial point of view, to such holders. The full text of the written opinion of J.P. Morgan dated September 4, 2017, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement/prospectus and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. Rockwell Collins shareowners are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the Rockwell Collins Board (in its capacity as such) in connection with and for the purposes of its evaluation of the merger, was directed only to the consideration to be paid in the merger and did not address any other aspect of the merger. J.P. Morgan expressed no opinion as to the fairness of the consideration to the holders of any other class of securities, creditors or other constituencies of Rockwell Collins or as to the underlying decision by Rockwell Collins to engage in the merger. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The opinion does not constitute a recommendation to any shareowner of Rockwell Collins as to how such shareowner should vote with respect to the merger or any other matter.

In arriving at its opinion, J.P. Morgan, among other things:

 

  reviewed the merger agreement;

 

  reviewed certain publicly available business and financial information concerning Rockwell Collins and the industry in which it operates;

 

  compared the proposed financial terms of the merger with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration paid for such companies;

 

 

compared the financial and operating performance of Rockwell Collins with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical

 

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market prices of Rockwell Collins common stock and certain publicly traded securities of such other companies;

 

  reviewed certain internal financial analyses and forecasts prepared by the management of Rockwell Collins relating to its business; and

 

  performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.

In addition, J.P. Morgan held discussions with certain members of the management of Rockwell Collins and UTC with respect to certain aspects of the merger, and the past and current business operations of Rockwell Collins and UTC, the financial condition and future prospects and operations of Rockwell Collins and UTC, the effects of the merger on the financial condition and future prospects of Rockwell Collins and UTC, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.

In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by Rockwell Collins and UTC or otherwise reviewed by or for J.P. Morgan, and J.P. Morgan did not independently verify (and did not assume responsibility or liability for independently verifying) any such information or its accuracy or completeness. J.P. Morgan did not conduct or was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of Rockwell Collins or UTC under any applicable laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of Rockwell Collins to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts or the assumptions on which they were based. J.P. Morgan also assumed that the merger will have the tax consequences described in this proxy statement/prospectus, and in discussions with, and materials furnished to J.P. Morgan by, representatives of Rockwell Collins, and that the other transactions contemplated by the merger agreement will be consummated as described in the merger agreement. J.P. Morgan also assumed that the representations and warranties made by Rockwell Collins and UTC in the merger agreement and the related agreements were and will be true and correct in all respects material to its analysis. J.P. Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors to Rockwell Collins with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on Rockwell Collins or UTC or on the contemplated benefits of the merger.

J.P. Morgan’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinion. J.P. Morgan’s opinion noted that subsequent developments may affect J.P. Morgan’s opinion, and that J.P. Morgan does not have any obligation to update, revise, or reaffirm such opinion. J.P. Morgan’s opinion is limited to the fairness, from a financial point of view, of the consideration to be received by holders of Rockwell Collins common stock (other than excluded shares) in the proposed merger, and J.P. Morgan has expressed no opinion as to the fairness of any consideration to the holders of any other class of securities, creditors or other constituencies of Rockwell Collins or the underlying decision by Rockwell Collins to engage in the merger. Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the merger, or any class of such persons relative to the consideration in the merger or with respect to the fairness of any such compensation. J.P. Morgan expressed no opinion as to the price at which Rockwell Collins common stock or UTC common stock will trade at any future time.

The terms of the merger agreement, including the consideration, were determined through arm’s length negotiations between Rockwell Collins and UTC, and the decision to enter into the merger agreement was solely that of the Rockwell Collins Board. J.P. Morgan’s opinion and financial analyses were only one of the many

 

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factors considered by the Rockwell Collins Board in its evaluation of the merger and should not be viewed as determinative of the views of the Rockwell Collins Board or management with respect to the merger or the consideration.

In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methodologies in rendering its opinion to the Rockwell Collins Board on September 4, 2017 and delivering the presentation to the Rockwell Collins Board on such date in connection with the rendering of such opinion , and the summaries do not purport to be a complete description of the analyses or data presented by J.P. Morgan. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by J.P. Morgan, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgan’s analyses.

Public Trading Multiples . Using publicly available information, J.P. Morgan compared selected financial data of Rockwell Collins with similar data for selected publicly traded companies engaged in businesses that J.P. Morgan judged to be analogous to Rockwell Collins. The companies selected by J.P. Morgan were as follows:

 

    Curtiss-Wright Corporation

 

    Esterline Technologies Corporation

 

    Harris Corporation

 

    HEICO Corporation

 

    L3 Technologies, Inc.

 

    Meggitt PLC

 

    Moog Inc.

 

    Safran S.A.

 

    Thales Group

 

    TransDigm Group Inc.

 

    Woodward, Inc.

 

    Zodiac Aerospace S.A.

 

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These companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of Rockwell Collins based on business sector participation, operational characteristics and financial metrics. Using publicly available information, J.P. Morgan calculated, for each selected company, (1) the multiple of enterprise value as of September 1, 2017 to estimated EBITDA (which means earnings before interest, tax, depreciation and amortization) for the fiscal year ended September 30, 2018, or EV/EBITDA FY2018E, and (2) the multiple of closing share price as of September 1, 2017 to estimated earnings per share for the fiscal year ended September 30, 2018, or P/E FY2018E, in each case based on Wall Street analysts’ consensus estimates and FactSet data. This analysis indicated the following EV/EBITDA FY2018E and P/E FY2018E multiples:

 

     EV/EBITDA FY2018E      P/E FY2018E  

Curtiss-Wright Corporation

     10.6x        20.2x  

Esterline Technologies Corporation

     9.3x        17.5x  

Harris Corporation

     12.8x        19.9x  

HEICO Corporation

     18.2x        33.8x  

L3 Technologies, Inc.

     12.6x        19.6x  

Meggitt PLC

     12.0x        21.5x  

Moog Inc.

     10.0x        18.8x  

Safran S.A.

     11.3x        19.9x  

Thales Group

     9.0x        18.2x  

TransDigm Group Inc.

     13.7x        20.4x  

Woodward, Inc.

     12.8x        20.2x  

Zodiac Aerospace S.A. (1)

     15.2x        25.2x  

 

  (1) Zodiac Aerospace S.A. share count, share price and balance sheet data as of January 18, 2017 (reflects latest publicly available figures prior to announcement of Safran S.A. / Zodiac Aerospace S.A. transaction).

Based on the results of this analysis and other factors that J.P. Morgan considered relevant, J.P. Morgan selected a multiple reference range for EV/EBITDA FY2018E of 10.0x–13.0x and a multiple reference range for P/E FY2018E of 18.0x–21.0x.

After applying such ranges to Rockwell Collins management’s estimate of the EBITDA and EPS (based upon current GAAP revenue recognition standards of Rockwell Collins, as described in “—Certain Rockwell Collins Unaudited Prospective Financial Information” and, with respect to management’s estimate of the EPS, burdened by costs associated with the B/E Aerospace acquisition, as directed by Rockwell Collins management), respectively, for Rockwell Collins for fiscal year 2018, the analysis indicated the following implied per share equity value ranges for Rockwell Collins common stock, rounded to the nearest $0.50:

 

    

Implied Per Share Equity Value

Range of Rockwell Collins Common Stock

 
               Low                              High                  

EV/EBITDA FY2018E

   $ 86.50      $ 125.50  

P/E FY2018E

   $ 114.00      $ 133.00  

 

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Transaction Multiples Analysis . Using publicly available information, J.P. Morgan examined selected transactions involving businesses that J.P. Morgan considered to be analogous to Rockwell Collins’ business or aspects thereof for purposes of analysis. These transactions were selected, among other reasons, because the businesses involved in these transactions share similar business characteristics to Rockwell Collins based on business sector participation, operational characteristics and financial metrics. Specifically, J.P. Morgan reviewed the following transactions:

 

Month/Year

Announced

   Acquiror    Target/Seller   

Transaction Value
(or Enterprise Value)

(“TV”)/LTM

EBITDA

May 2017    Safran S.A.    Zodiac Aerospace S.A.    26.9x/9.8x (1)
January 2017    Safran S.A.    Zodiac Aerospace S.A.    23.8x/11.0x (2)
October 2016    Rockwell Collins, Inc.    B/E Aerospace, Inc.    13.6x
August 2015    Berkshire Hathaway Inc.    Precision Castparts Corp.    12.3x
July 2015    Lockheed Martin Corporation    Sikorsky Aircraft Corporation    11.1x/8.7x (3)
February 2015    Harris Corporation    Exelis Inc.    9.2x/8.0x (4)
August 2013    Rockwell Collins, Inc.    ARINC Incorporated
(For reference only)
   11.3x (5)
December 2012    General Electric Company    Avio S.p.A. (aviation business)    8.5x
September 2011    United Technologies Corporation    Goodrich Corporation    12.9x
January 2007    General Electric Company    Smiths Aerospace    11.3x (6)

 

(1) For reference only – Normalized multiple of 9.8x based on revised offer estimated using LTM EBITDA based on disclosed normalized EBIT multiple and LTM financials as of May 2017.
(2) For reference only – Normalized multiple of 11.0x based on original offer estimated using LTM EBITDA based on disclosed normalized EBIT multiple and LTM financials as of January 2017.
(3) For reference only – 8.7x represents the post-tax benefit multiple.
(4) For reference only – 8.0x represents the multiple with EBITDA adjusted for purchase accounting reset of its net actuarial pension losses to zero.
(5) For reference only – Based on ARINC Incorporated 2013 EBITDA.
(6) Based on LTM EBIT plus D&A per annual filing.

J.P. Morgan calculated, for each selected transaction, the multiple of the transaction value (or enterprise value) to the target company’s EBITDA for the 12-month period prior to the announcement of the applicable transaction, or TV/ LTM EBITDA.

Based on the results of this analysis and other factors that J.P. Morgan considered relevant, J.P. Morgan selected a multiple reference range of 9.0x–14.0x for TV/ LTM EBITDA.

After applying such ranges to figures provided by Rockwell Collins for LTM EBITDA for the 12-month period ended September 30, 2017 (based upon current GAAP revenue recognition standards of Rockwell Collins, as described in “—Certain Rockwell Collins Unaudited Prospective Financial Information”), the analysis indicated the following implied per share equity value ranges for Rockwell Collins common stock, rounded to the nearest $0.50:

 

    

Implied Per Share Equity Value

Range of Rockwell Collins Common Stock

 
               Low                                  High              

TV/ LTM EBITDA

   $ 68.00      $ 127.50  

Discounted Cash Flow Analysis.

J.P. Morgan conducted a discounted cash flow analysis for the purpose of determining the diluted equity value per share for Rockwell Collins common stock. J.P. Morgan calculated the unlevered free cash flows that

 

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Rockwell Collins is expected to generate (1) during fiscal years 2018 through 2022 based upon Rockwell Collins’ management forecast and (2) during fiscal years 2023 through 2027 based upon extrapolations from the management forecast provided by Rockwell Collins management. As described in “—Certain Rockwell Collins Unaudited Prospective Financial Information,” the management forecast used by J.P. Morgan for purpose of its discounted cash flow analysis was the forecast giving effect to the Financial Accounting Standards Board’s new revenue recognition standards. J.P. Morgan also calculated a range of terminal asset values for Rockwell Collins at the end of the projection period by applying terminal growth rates, based on direction from Rockwell Collins management, ranging from 2.2% to 3.2% to the unlevered free cash flows, excluding pension contributions, to which a 0% terminal growth rate was applied per Rockwell Collins’ management instruction. The unlevered free cash flows and the range of terminal values were then discounted to present values using discount rates ranging from 7.5% to 8.5%, which range was chosen by J.P. Morgan based upon an analysis of the weighted average cost of capital of Rockwell Collins, taking into account macro-economic assumptions, estimates of risk, Rockwell Collins’ capital structure and other appropriate factors. The present values of the unlevered free cash flows and the range of terminal values were then adjusted for Rockwell Collins’ net debt and noncontrolling interest and divided by the diluted shares outstanding of Rockwell Collins. The discounted cash flow analysis indicated an implied per share equity value range for Rockwell Collins common stock, rounded to the nearest $0.50, of $107.50 to $158.50.

Other Information.

J.P. Morgan conducted additional analyses, including historical stock trading, equity research analyst price targets and implied premia paid analyses and noted that these are not valuation methodologies and were presented for reference only.

Historical Stock Trading

J.P. Morgan reviewed the historical share prices of Rockwell Collins common stock for the 52-week period ended August 2, 2017 (the last market close prior to abnormal trading in Rockwell Collins common stock on August 3, 2017). J.P. Morgan noted that the low and high closing share prices during this period were $79.21 and $113.73 per share of Rockwell Collins common stock, respectively.

Equity Research Analyst Price Targets

J.P. Morgan reviewed the most recent publicly available research analyst price targets for Rockwell Collins common stock prepared and published by selected equity research analysts. J.P. Morgan noted that the range of such price targets as of August 2, 2017 (the last market close prior to abnormal trading in Rockwell Collins common stock on August 3, 2017) was $96.00 to $137.00 per share of Rockwell Collins common stock.

Implied Premia Paid

For the years 2008 through 2017 (as of September 1, 2017), J.P. Morgan calculated, using publicly available information, the first quartile, median and third quartile one-day, one-month and 52-week high unaffected stock price premia paid for types of acquisition transactions with enterprise values above $10 billion that J.P. Morgan deemed appropriate in its professional judgment. The analysis indicated a first quartile, median and third quartile one-day, one-month and 52-week high unaffected stock premia of 24%—39%, 25%—47% and 3%—25%, respectively. J.P. Morgan then calculated an illustrative range of prices per share of Rockwell Collins common stock of $139.50—$156.00, $132.00—$155.00 and $117.00—$142.00, respectively (in each case, rounded to the nearest $0.50).

Miscellaneous.

The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and

 

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is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were merely utilized to create points of reference for analytical purposes and should not be taken to be the view of J.P. Morgan with respect to the actual value of Rockwell Collins. The order of analyses described does not represent the relative importance or weight given to those analyses by J.P. Morgan. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion.

Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be acquired or sold. None of the selected companies reviewed as described in the above summary is identical to Rockwell Collins, and none of the selected transactions reviewed was identical to the merger. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of Rockwell Collins. The transactions selected were similarly chosen because their participants, size and other factors, for purposes of J.P. Morgan’s analysis, may be considered similar to the merger. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to Rockwell Collins and the transactions compared to the merger.

As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. J.P. Morgan was selected to advise Rockwell Collins with respect to the merger on the basis of, among other things, such experience and its qualifications and reputation in connection with such matters and its familiarity with Rockwell Collins, UTC and the industries in which they operate.

For services rendered in connection with the merger, Rockwell Collins agreed to pay J.P. Morgan a transaction fee of $60 million, of which $10 million became payable by Rockwell Collins at the time J.P. Morgan delivered its opinion, and the balance of which is payable upon the closing of the merger. In addition, Rockwell Collins has agreed to reimburse J.P. Morgan for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities arising out of J.P. Morgan’s engagement. During the two years preceding the date of J.P. Morgan’s opinion, J.P. Morgan and its affiliates have had commercial or investment banking relationships with Rockwell Collins and UTC for which J.P. Morgan and such affiliates have received customary compensation. Such services during such period have included acting as joint lead arranger and joint bookrunner on Rockwell Collins’ facility agreement in December 2016, acting as bookrunner on an offering of debt securities by Rockwell Collins in March 2017, acting as financial advisor to Rockwell Collins on its acquisition of B/E Aerospace, Inc. in April 2017, acting as sole lead arranger and bookrunner on Rockwell Collins’ facility agreement in April 2017, and acting as joint lead arranger and joint bookrunner on Rockwell Collins’ facility agreement in April 2017; acting as financial advisor to UTC on the sale of Sikorsky Aircraft in November 2015, acting as bookrunner on an offering of debt securities by UTC in February 2016, acting as sole lead arranger and joint bookrunner on UTC’s facility agreement in August 2016, acting as bookrunner on an offering of debt securities by UTC in October 2016, and acting as bookrunner on an offering of debt securities by UTC in May 2017. During such period, J.P. Morgan and its affiliates have provided treasury services and asset management services to UTC for customary compensation. In addition, J.P.

 

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Morgan’s commercial banking affiliate is an agent bank and a lender under outstanding credit facilities of Rockwell Collins and UTC, for which it receives customary compensation or other financial benefits. In addition, as of August 28, J.P. Morgan and its affiliates held, on a proprietary basis, less than 1% of the outstanding common stock of each of Rockwell Collins and UTC. During the two year period preceding delivery of its opinion, the aggregate fees received by J.P. Morgan from Rockwell Collins were approximately $54 million and from UTC were approximately $42 million. In the ordinary course of their businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities of Rockwell Collins and UTC for their own accounts or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities.

Opinion of Citigroup Global Markets Inc.

On September 4, 2017, Citigroup Global Markets Inc., which is referred to as Citigroup, delivered to the Rockwell Collins Board a written opinion dated September 4, 2017, to the effect that, as of such date and based on and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications set forth in the written opinion, the merger consideration to be received by the holders of outstanding shares of common stock of Rockwell Collins (other than excluded shares) in the merger was fair, from a financial point of view, to such holders.

The full text of Citigroup’s written opinion, dated September 4, 2017, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Citigroup in rendering its opinion, is attached to this proxy statement/prospectus as Annex C and is incorporated into this proxy statement/prospectus by reference in its entirety. The summary of Citigroup’s opinion set forth below is qualified in its entirety by reference to the full text of the opinion. We urge you to read the opinion carefully and in its entirety. Citigroup’s opinion, the issuance of which was authorized by Citigroup’s fairness opinion committee, was provided to the Rockwell Collins Board (in its capacity as such) in connection with its evaluation of the merger and was limited to the fairness, from a financial point of view, as of the date of the opinion, to the holders of outstanding shares of common stock of Rockwell Collins (other than excluded shares) of the merger consideration to be received by such holders in the merger. Citigroup’s opinion does not address any other aspects or implications of the merger and does not constitute a recommendation to any shareowners as to how such shareowner should vote or act on any matters relating to the merger or otherwise. Citigroup’s opinion does not address the underlying business decision of Rockwell Collins to effect the merger, the relative merits of the merger as compared to any alternative business strategies that might exist for Rockwell Collins or the effect of any other transaction in which Rockwell Collins might engage. The following is a summary of Citigroup’s opinion.

In arriving at its opinion, Citigroup, among other things:

 

    reviewed the merger agreement;

 

    held discussions with certain senior officers, directors and other representatives and advisors of Rockwell Collins concerning the businesses, operations and prospects of Rockwell Collins;

 

    examined certain publicly available business and financial information relating to Rockwell Collins;

 

    examined certain financial forecasts and other information and data relating to Rockwell Collins which were provided to or discussed with Citigroup by the management of Rockwell Collins;

 

    reviewed the financial terms of the merger as set forth in the merger agreement in relation to, among other things: current and historical market prices and trading volumes of Rockwell Collins common stock, the historical and projected earnings and other operating data of Rockwell Collins and the capitalization and financial condition of Rockwell Collins;

 

    considered, to the extent publicly available, the financial terms of certain other transactions which Citigroup considered relevant in evaluating the merger;

 

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    analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations Citigroup considered relevant in evaluating those of Rockwell Collins; and

 

    conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as Citigroup deemed appropriate in arriving at its opinion.

Separately, Citigroup also held discussions with certain senior officers and other representatives and advisors of UTC concerning the businesses, operations and prospects of UTC. In addition, Citigroup examined certain publicly available business and financial information relating to UTC as well as other information and data relating to UTC which were provided to or discussed with Citigroup by the management of Rockwell Collins and UTC, including information relating to the potential strategic implications and operational benefits (including the amount thereof) anticipated by the management of Rockwell Collins and UTC to result from the merger, as well as certain pro forma financial effects of the merger on UTC. Citigroup reviewed the financial terms of the merger as set forth in the merger agreement in relation to, among other things: current and historical market prices and trading volumes of UTC common stock; the historical and projected earnings based on summary consensus estimates and other operating data of UTC; and the capitalization and financial condition of UTC.

In rendering its opinion, Citigroup assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with Citigroup and upon the assurances of the management of Rockwell Collins that they were not aware of any relevant information that was omitted or that remained undisclosed to Citigroup. With respect to financial forecasts relating to Rockwell Collins and other information and data relating to Rockwell Collins and UTC provided to or otherwise reviewed by or discussed with Citigroup, Citigroup was advised by the respective managements of Rockwell Collins and UTC, as applicable, that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the managements of Rockwell Collins and UTC, as applicable, as to the future financial performance of Rockwell Collins and UTC, the potential strategic implications and operational benefits anticipated to result from the merger and the other matters covered thereby, and assumed, with Rockwell Collins’ consent, that the financial results (including the potential strategic implications and operational benefits anticipated to result from the merger) reflected in such forecasts and other information and data will be realized in the amounts projected.

Citigroup also assumed, with Rockwell Collins’ consent, that the merger will be consummated in accordance with its terms, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the merger, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on Rockwell Collins, UTC or the contemplated benefits of the merger. Citigroup did not express any opinion as to what the value of UTC common stock actually will be when issued pursuant to the merger or the price at which shares of UTC common stock will trade at any time. Citigroup did not make and it was not provided with an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Rockwell Collins or UTC, and Citigroup did not make any physical inspection of the properties or assets of Rockwell Collins or UTC. Citigroup was informed by Rockwell Collins that it had contacted certain parties to solicit indications of interest prior to its engagement. Citigroup’s opinion did not address the underlying business decision of Rockwell Collins to effect the merger, the relative merits of the merger as compared to any alternative business strategies that might exist for Rockwell Collins or the effect of any other transaction in which Rockwell Collins might engage. Citigroup also expressed no view as to, and Citigroup’s opinion did not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or employees of any parties to the merger, or any class of such persons, relative to the merger consideration. Citigroup’s opinion was necessarily based upon information available to it, and financial, stock market and other conditions and circumstances existing, as of September 4, 2017, except as otherwise noted.

 

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The following is a summary of the material financial analyses delivered by Citigroup to the Rockwell Collins Board in connection with rendering its opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Citigroup, nor does the order of analyses described represent relative importance or weight given to those analyses by Citigroup. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Citigroup’s financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before September 1, 2017 and is not necessarily indicative of current market conditions.

The preparation of financial opinions is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances, and, therefore, financial opinions are not readily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth below, without considering the analyses as a whole, could create an incomplete view of the processes underlying Citigroup’s opinion. In arriving at its fairness determination, Citigroup considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Citigroup made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the analyses as a comparison is directly comparable to Rockwell Collins, UTC or the contemplated merger.

Citigroup prepared these analyses for purposes of providing its opinion to the Rockwell Collins Board as to the fairness, from a financial point of view, to the holders of outstanding shares of common stock of Rockwell Collins (other than excluded shares), as of the date of the opinion, of the merger consideration to be paid to such holders pursuant to the merger agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Rockwell Collins, UTC, Citigroup or any other person assumes responsibility if future results are materially different from those forecast.

The merger consideration was determined through arm’s-length negotiations between Rockwell Collins and UTC, rather than by any financial advisor, and was approved by the Rockwell Collins Board. Citigroup provided advice to Rockwell Collins during these negotiations. Citigroup did not, however, recommend any specific amount of consideration to Rockwell Collins or the Rockwell Collins Board or that any specific amount of consideration constituted the only appropriate consideration for the transaction.

Selected Public Companies Analysis . Citigroup reviewed and compared certain financial information for Rockwell Collins to corresponding financial information, ratios and public market multiples for the following publicly traded corporations in the aerospace and defense industries (collectively referred to as the “selected companies”):

 

    Safran S.A.

 

    Thales Group

 

    TransDigm Group Inc.

 

    Meggitt PLC

 

    Woodward, Inc.

 

    Curtiss-Wright Corporation

 

    Moog Inc.

 

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    Esterline Technologies Corporation

 

    Harris Corporation

 

    L3 Technologies, Inc.

Although none of the selected companies are directly comparable to Rockwell Collins, the companies included were chosen because they have operations that, for purposes of analysis, may be considered similar to certain operations of Rockwell Collins based on business sector participation, operational characteristics and financial metrics. The quantitative information used in this analysis, to the extent that it is based on market data, was based on market data as of September 1, 2017.

Citigroup also calculated and compared various financial multiples and ratios using information it obtained from SEC filings, Wall Street research and FactSet. With respect to the selected companies, Citigroup calculated the firm value (which is referred to as FV), as a multiple of projected earnings before interest, taxes, depreciation and amortization (which is referred to as EBITDA, and such multiple is referred to as the FV / FY2018E EBITDA Multiple) for fiscal year 2018, and the ratio of the price of a share of common stock of the selected companies (using the applicable closing market price per share as of September 1, 2017) to estimated earnings per share (which is referred to as the Price / FY2018E EPS Multiple) for fiscal year 2018. The multiples and ratios for each of the selected companies were based on Wall Street research consensus estimates. The following tables present the results of this analysis:

 

    

FV/FY2018E EBITDA

(IFRS/GAAP) (1)

  

Price/FY2018E EPS

      (IFRS/GAAP)  (2)       

Safran S.A. (3)

   10.3x/11.3x    19.3x/19.9x

Thales Group (4)

   8.8x/9.0x    18.5x/18.2x

TransDigm Group Inc. (5)

   13.7x    20.4x

Meggitt PLC (6)

   10.2x/12.0x    18.4x/21.5x

Woodward, Inc.

   12.8x    20.2x

Curtiss-Wright Corporation  (7)

   10.6x    20.2x

Moog Inc.

   10.0x    18.8x

Esterline Technologies Corporation

   9.3x    17.5x

Harris Corporation (8)

   12.8x    19.9x

L3 Technologies, Inc. (9)

   12.6x    19.6x

 

  (1) Where only one multiple is shown, it is based on GAAP.
  (2) Where only one multiple is shown, it is based on GAAP.
  (3) Reflects illustrative adjustments (based on publicly available information) from International Financial Reporting Standard (“IFRS”) to GAAP. Fiscal year end adjusted to September 30.
  (4) Reflects illustrative adjustments (based on publicly available information) from IFRS to GAAP. Fiscal year end adjusted to September 30.
  (5) TransDigm balance sheet adjusted to account for $22.00 per share special dividend. The dividend was payable on September 12, 2017, to shareowners of record on September 5, 2017, with an ex-dividend date of September 1, 2017.
  (6) Reflects illustrative adjustments (based on publicly available information) from IFRS to GAAP. Fiscal year end adjusted to September 30.
  (7) Fiscal year end adjusted to September 30.
  (8) Fiscal year end adjusted to September 30.
  (9) Fiscal year end adjusted to September 30.

Citigroup identified an illustrative range of FV / FY2018E EBITDA Multiples of 9.0x to 13.7x. Citigroup then multiplied the estimated EBITDA for Rockwell Collins for fiscal year 2018 (based upon current GAAP revenue recognition standards of Rockwell Collins, as described in “—Certain Rockwell Collins Unaudited

 

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Prospective Financial Information”) by the 9.0x to 13.7x illustrative range of FV / FY2018E EBITDA Multiples for fiscal year 2018, which resulted in an illustrative range of implied values of $74.50 to $135.00 per share of Rockwell Collins common stock (rounded to the nearest $0.50).

Citigroup also identified an illustrative range of Price / FY2018E EPS Multiples of 17.5x to 21.5x. Citigroup then multiplied the estimated earnings per share of Rockwell Collins common stock for fiscal year 2018 (based upon current GAAP revenue recognition standards of Rockwell Collins, as described in “—Certain Rockwell Collins Unaudited Prospective Financial Information” and burdened by costs associated with the B/E Aerospace acquisition, as directed by Rockwell Collins management) by the 17.5x to 21.5x illustrative range of Price / FY2018E EPS Multiples for fiscal year 2018, which resulted in an illustrative range of implied values of $111.00 to $135.50 per share of Rockwell Collins common stock (rounded to the nearest $0.50).

Selected Precedent Transactions Analysis . Citigroup analyzed certain publicly available information relating to the following selected transactions in the aerospace and defense industry since January 2007:

 

Month/Year

Announced

   Acquiror    Target/Seller    FV/LTM EBITDA
May 2017 (1)    Safran S.A. (2)    Zodiac Aerospace S.A.    26.9x/9.8x (3)
October 2016    Rockwell Collins, Inc.    B/E Aerospace, Inc.    13.6x
August 2015    Berkshire Hathaway Inc.    Precision Castparts Corp.    12.3x
July 2015    Lockheed Martin Corporation    Sikorsky Aircraft Corporation    11.1x (4)
February 2015    Harris Corporation    Exelis Inc.    9.2x (5)
December 2012    General Electric Company (6)    Avio S.p.A. (aviation business) (Cinven & Finmeccanica)    8.5x
September 2011    United Technologies Corporation    Goodrich Corporation    12.9x
January 2007    General Electric Company    Smiths Aerospace    11.3x (7)

 

(1) Reflects revised offer date of May 2017; original offer was made in January 2017.
(2) Non-US transactions converted to USD at respective spot rates on day of announcement.
(3) 9.8x multiple reflects an estimated, normalized Zodiac LTM EBITDA based on disclosed EBIT multiple and transaction value plus LTM Depreciation and Amortization based on annual and half-year publicly-filed financial reports, which was used in lieu of the unadjusted 26.9x multiple because the unadjusted multiple was not comparable for valuation purposes.
(4) Including estimated tax benefits from making an IRC Section 338(h)(10) election to apply to the transaction, implies a transaction multiple of approximately 8.7x.
(5) Multiple of 8.0x based on EBITDA adjusted for purchase accounting reset of its net actuarial pension losses to zero.
(6) Non-US transactions converted to USD at respective spot rates on day of announcement.
(7) Based on LTM EBIT plus D&A per annual filing.

For each of the selected transactions, Citigroup calculated and compared FV as a multiple of the target’s EBITDA for the last 12 months (which is referred to as LTM) as most recently disclosed at the time of the announcement of the transaction (which we refer to as the FV/LTM EBITDA Multiple). While none of the companies that participated in the selected transactions are directly comparable to Rockwell Collins (with the exception of Rockwell Collins itself), these transactions were selected, among other reasons, because the businesses involved in these transactions share similar business characteristics to Rockwell Collins based on business sector participation, operational characteristics and financial metrics. Citigroup identified an illustrative range of FV/LTM EBITDA Multiples of 8.5x–13.6x. Citigroup then multiplied this illustrative range of FV/LTM EBITDA Multiples by Rockwell Collins’ projected EBITDA for the 12 months ended September 30, 2017 (based upon current GAAP revenue recognition standards of Rockwell Collins, as described in “—Certain Rockwell Collins Unaudited Prospective Financial Information”) as provided to Citigroup by the management of Rockwell Collins, which resulted in an illustrative range of implied values of $61.50 to $123.50 per share of Rockwell Collins common stock (rounded to the nearest $0.50).

 

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Discounted Cash Flow Analysis.

Citigroup conducted a discounted cash flow analysis for the purpose of determining the fully diluted equity value per share for Rockwell Collins common stock. Citigroup calculated the unlevered free cash flows that Rockwell Collins is expected to generate (1) during fiscal years 2018 through 2022 based upon Rockwell Collins’ management forecast and (2) during fiscal years 2023 through 2027 based upon extrapolations from Rockwell Collins’ management forecast by Rockwell Collins’ management. As described in “—Certain Rockwell Collins Unaudited Prospective Financial Information,” the management forecast used by Citigroup for purpose of its discounted cash flow analysis was the forecast giving effect to the Financial Accounting Standards Board’s new revenue recognition standards. Citigroup also calculated a range of terminal values for Rockwell Collins at the end of the projection period by applying terminal growth rates, based on direction from Rockwell Collins management, ranging from 2.2% to 3.2% to the terminal year estimate of unlevered free cash flow excluding pension contributions, to which a 0% terminal growth rate was applied per Rockwell Collins’ management instruction. The unlevered free cash flows and the range of terminal values were then discounted to present values using discount rates ranging from 7.4% to 8.7%, which range was chosen by Citigroup based upon an analysis of the weighted average cost of capital of Rockwell Collins, taking into account macro-economic assumptions, estimates of risk, Rockwell Collins’ capital structure and other appropriate factors. The present values of the unlevered free cash flows and the range of terminal values were then adjusted for Rockwell Collins’ net debt and noncontrolling interest and divided by the fully diluted shares outstanding of Rockwell Collins. The discounted cash flow analysis indicated an implied per share equity value range for Rockwell Collins common stock, rounded to the nearest $0.50, of $103.50 to $165.00.

Other Information.

Citigroup noted that the historical stock trading, equity research analyst price targets and implied premia paid analyses are not valuation methodologies and were presented for reference only.

Historical Stock Trading

Citigroup reviewed the historical share prices of Rockwell Collins common stock for the 52-week period ended August 2, 2017 (the last market close prior to abnormal trading in Rockwell Collins common stock on August 3, 2017). Citigroup noted that the low and high closing share prices during this period were $79.21 and $113.73 per share of Rockwell Collins common stock, respectively.

Equity Research Analyst Price Targets

Citigroup reviewed the most recent publicly available research analysts’ one-year forward price targets for Rockwell Collins common stock prepared and published by selected research analysts. Citigroup noted that the range of such price targets as of August 2, 2017 (the last market close prior to abnormal trading in Rockwell Collins common stock on August 3, 2017) was $96.00 to $137.00 per share of Rockwell Collins common stock. Citigroup also noted that the range of such price targets, discounted one year at a 9.5% cost of equity, was $87.50 to $125.00, rounded to the nearest $0.50.

Implied Premia Paid

For the years 2008 through 2017 (as of September 1, 2017), Citigroup calculated, using publicly available information, the first quartile, median and third quartile one-day, one-month and 52-week high unaffected stock price premia paid for types of acquisition transactions with enterprise values above $10 billion that Citigroup deemed appropriate in its professional judgment. The analysis indicated a first quartile, median and third quartile one-day, one-month and 52-week high unaffected stock premia of 24%–39%, 25%–47% and 3%–25%, respectively. Citigroup then calculated an illustrative range of prices per share of Rockwell Collins common stock of $139.50–$156.00, $132.00–$155.00 and $117.00–$142.00, respectively (in each case, rounded to the nearest $0.50).

 

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As described above, Citigroup’s opinion to the Rockwell Collins Board was one of many factors taken into consideration by the Rockwell Collins Board in making its determination to approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Citigroup in connection with its fairness opinion and is qualified in its entirety by reference to the written opinion attached as Annex C.

Under the terms of Citigroup’s engagement, Rockwell Collins has agreed to pay Citigroup, for its financial advisory services in connection with the merger, an aggregate fee of approximately $60 million, $8 million of which became payable upon the public announcement by Rockwell Collins of the merger and the balance of which is payable upon completion of the merger. Subject to certain limitations, Rockwell Collins also has agreed to reimburse Citigroup, subject to certain conditions, for travel and other deal-related expenses incurred by Citigroup in performing its services, including reasonable fees and expenses of its legal counsel, and to indemnify Citigroup and related persons against certain liabilities arising out of its engagement.

Citigroup and its affiliates in the past have provided, and currently provide, services to Rockwell Collins unrelated to the merger, for which services Citigroup and such affiliates have received and expect to receive compensation, including, without limitation, during the two-year period prior to September 4, 2017, having acted in March 2017 as joint bookrunner in connection with the issuance of $300,000,000 1.950% Notes due 2019, $1,100,000,000 2.800% Notes due 2022, $950,000,000 3.200% Notes due 2024, $1,300,000,000 3.500% Notes due 2027 and $1,000,000,000 4.350% Notes due 2047; having acted in December 2016 as joint bookrunner on a $1.5 billion term loan facility; having acted in December 2016 as joint bookrunner on a $1.5 billion revolving credit agreement; and having acted in February 2016 as joint bookrunner on a $200 million revolving credit agreement. In addition, Citigroup and its affiliates in the past have provided, and currently provide , services to UTC and certain of its affiliates, unrelated to the merger, for which services Citigroup and such affiliates have received and expect to receive compensation, including, without limitation, during the two-year period prior to September 4, 2017, having acted in May 2017 as joint bookrunner in connection with the issuance of $1,000,000,000 1.900% Notes due 2020, $500,000,000 2.300% Notes due 2022, $800,000,000 2.800% Notes due 2024, $1,100,000,000 3.125% Notes due 2027 and $600,000,000 4.050% Notes due 2047; having acted in October 2016 as joint bookrunner in connection with the issuance of $650,000,000 1.500% Notes due 2019, $750,000,000 1.950% Notes due 2021, $1,150,000,000 2.650% Notes due 2026, $1,100,000,000 3.750% Notes due 2046 and $350,000,000 Floating Rate Notes due 2019; having acted in August 2016 as joint bookrunner on a $2.2 billion revolving credit facility; and having acted in February 2016 as joint bookrunner in connection with the issuance of €950,000,000 1.125% Notes due 2021, €500,000,000 1.875% Notes due 2026 and €750,000,000 Floating Rate Notes due 2018. In the ordinary course of its business, Citigroup and its affiliates may actively trade or hold the securities of Rockwell Collins and UTC for its own account or for the account of its customers and, accordingly, may at any time hold a long or short position in such securities. As of August 31, 2017, Citigroup and its affiliates held, on a proprietary basis, less than 1% of the outstanding common stock of each of Rockwell Collins and UTC. In addition, Citigroup and its affiliates may maintain relationships with Rockwell Collins, UTC and their respective affiliates. During the two-year period ended August 31, 2017, Citigroup and its affiliates have received compensation of approximately $7.6 million from Rockwell Collins and its affiliates and approximately $4.5 million from UTC and its affiliates.

The Rockwell Collins Board selected Citigroup to act as one of its financial advisors in connection with the merger based on Citigroup’s reputation and experience. Citigroup is an internationally recognized investment banking firm which regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes.

Certain Rockwell Collins Unaudited Prospective Financial Information

Rockwell Collins does not, as a matter of course, make long-term projections as to future performance available to the public other than generally providing, on a quarterly basis, estimated ranges of certain expected

 

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financial results and operational metrics for the current or impending fiscal year in its regular earnings press releases and other investor materials. Rockwell Collins avoids making public projections for extended periods due to, among other things, the unpredictability of the underlying assumptions and estimates.

In connection with a possible transaction, certain non-public, unaudited prospective financial information regarding Rockwell Collins’ anticipated results of operations for fiscal years 2018 through 2022 was provided to the Rockwell Collins Board, Rockwell Collins’ financial advisors, J.P. Morgan and Citigroup, and to UTC. This unaudited prospective financial information is referred to as the forecasts.

UTC did not furnish Rockwell Collins with any internally generated non-public prospective financial information regarding UTC. For purposes of Rockwell Collins’ due diligence review of UTC, UTC directed Rockwell Collins to use certain Wall Street equity analyst projections for 2018 and 2019 and UTC’s own publicly available guidance for 2017 and 2020 for information on UTC’s expected future financial results. For its due diligence review, Rockwell Collins used the expected future financial results reflected in those analyst projections and guidance and other publicly available information.

The forecasts were prepared by Rockwell Collins senior management and are based on numerous estimates and assumptions. The 2018 amounts resulted from Rockwell Collins’ annual operating plan process and reflect a detailed forecast primarily driven by Rockwell Collins’ original equipment manufacturer production rate projections and other market insights into expected revenues, as well as anticipated product line margins and discretionary spending. The 2019 to 2022 amounts resulted from Rockwell Collins’ annual strategic and financial planning process and reflect more general market-level forecasts primarily driven by original equipment manufacturer rate projections and other market growth-rate projections, as well as anticipated portfolio margins and discretionary spending. The underlying assumptions used in the strategic and financial planning process were generally based on information and market factors known to management as of August 2017, and they include, among others:

 

    air traffic grows at approximately 5% per year;

 

    global GDP grows at approximately 3% per year;

 

    air transport original equipment manufacturer rates continue to grow, with narrow-body rates growing at a 6% compound annual growth rate from 2017 to 2022 and legacy widebody rates declining, with such decline driven by weaker demand and transition to newer aircraft models;

 

    business aviation original equipment manufacturer delivery rates grow at a 3% compound annual growth rate;

 

    a gradual rise in short term interest rates to 3% by 2022;

 

    capital expenditures remain roughly flat at approximately 3.7% to 4% of sales per year;

 

    stability in the U.S. corporate tax rate; and

 

    stability in fuel prices at current levels.

The forecasted financial information contained in this section “—Certain Rockwell Collins Unaudited Prospective Financial Information” was not prepared for public disclosure. The inclusion of this information in this proxy statement/prospectus does not constitute an admission or representation by Rockwell Collins that the information is material. You should note that this forecasted financial information constitutes forward-looking statements. See “Cautionary Note Regarding Forward Looking Statements” beginning on page 37.

The summary of the forecasts is being included in this proxy statement/prospectus to give Rockwell Collins shareowners access to non-public information that was provided to the Rockwell Collins Board, Rockwell Collins’ financial advisors, J.P. Morgan and Citigroup, and UTC in the course of evaluating the merger.

Rockwell Collins uses certain financial measures in the forecasts that are not in accordance with GAAP as supplemental measures to evaluate its operational performance. While Rockwell Collins believes that non-GAAP

 

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financial measures provide useful supplemental information, there are limitations associated with the use of non-GAAP financial measures. Non-GAAP financial measures are not prepared in accordance with GAAP, are not reported by all of Rockwell Collins’ competitors and may not be directly comparable to similarly titled measures of Rockwell Collins’ competitors due to potential differences in the exact method of calculation. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in accordance with GAAP.

The following is a summary of the forecasts:

 

     Fiscal Year (1)  (in millions, except per share data) (2)  
     2018      2019      2020      2021      2022  

Revenue

   $ 8,565      $ 9,072      $ 9,529      $ 10,043      $ 10,544  

Net Income

   $ 1,050      $ 1,266      $ 1,420      $ 1,537      $ 1,647  

EBITDA

   $ 2,036      $ 2,290      $ 2,498      $ 2,664      $ 2,836  

EBIT

   $ 1,620      $ 1,867      $ 2,046      $ 2,191      $ 2,325  

Free Cash Flow

   $ 1,042      $ 1,254      $ 1,428      $ 1,578      $ 1,722  

Earnings per share

   $ 6.38      $ 7.70      $ 8.71      $ 9.56      $ 10.41  

 

(1) Rockwell Collins’ fiscal year end is the Friday closest to September 30.
(2) Forecasts exclude certain one-time acquisition costs associated with the acquisition of B/E Aerospace by Rockwell Collins.

The forecasts summarized above give effect to the Financial Accounting Standards Board’s new revenue recognition standards, which will be effective for Rockwell Collins beginning in 2019 (with early adoption permitted, but not earlier than 2018). The forecasts Rockwell Collins made available to the Rockwell Collins Board, Rockwell Collins’ financial advisors, J.P. Morgan and Citigroup, and UTC also included forecasts for certain metrics under Rockwell Collins’ current revenue recognition standards. The following is a summary of those forecasts.

 

     Fiscal Year (1) (in millions, except per share data) (2)  
     2018      2019      2020      2021      2022  

Revenue

   $ 8,699      $ 9,145      $ 9,554      $ 10,030      $ 10,559  

Net Income

   $ 1,065      $ 1,204      $ 1,322      $ 1,434      $ 1,564  

Free Cash Flow

   $ 1,042      $ 1,254      $ 1,428      $ 1,578      $ 1,722  

Earnings per share

   $ 6.47      $ 7.32      $ 8.11      $ 8.92      $ 9.88  

 

(1) Rockwell Collins’ fiscal year end is the Friday closest to September 30.
(2) Forecasts exclude certain one-time acquisition costs associated with the acquisition of B/E Aerospace by Rockwell Collins.

In addition, Rockwell Collins provided LTM 2017 (period ending September 30, 2017) and 2018 (period ending September 30, 2018) EBITDA estimates ($2,002 and $2,151, respectively, in millions) to the Rockwell Collins Board, Rockwell Collins’ financial advisors, J.P. Morgan and Citigroup, based upon Rockwell Collins’ current revenue recognition standards. The LTM 2017 estimate was on a pro forma basis assuming a full year contribution from B/E Aerospace and assumed annualized synergies recognized since the closing of the acquisition of B/E Aerospace by Rockwell Collins. For purposes of J.P. Morgan and Citigroup’s analyses described in “—Opinion of J.P. Morgan” and “—Opinion of Citigroup Global Markets Inc.,” the forecasts giving effect to the Financial Accounting Standards Board’s new revenue recognition standards were used for the applicable discounted cash flow analyses, and the forecasts using Rockwell Collins’ current revenue recognition standards were used for the public trading multiples and transaction multiples analysis of J.P. Morgan and for the selected public companies and selected precedent transactions analysis of Citigroup.

In addition, the following table shows the estimated amounts of unlevered free cash flow of Rockwell Collins, which Rockwell Collins management directed J.P. Morgan and Citigroup to use in connection with their

 

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analyses described in “—Opinion of J.P. Morgan” and “—Opinion of Citigroup Global Markets Inc.,” respectively. The information for the fiscal years 2018 through 2022 was calculated using the forecasts, and the information for the fiscal years 2023 through 2027 was calculated from an extrapolation based on the forecasts. These calculations were not included in the forecasts provided to UTC.

 

    Fiscal Year (1) (in millions of U.S. dollars) (2)  
    2018     2019     2020     2021     2022     2023     2024     2025     2026     2027  

Revenue

    8,565       9,072       9,529       10,043       10,544       11,022       11,471       11,885       12,261       12,592  

EBITDA

    2,036       2,290       2,498       2,664       2,836       2,964       3,085       3,197       3,298       3,387  

EBIT

    1,620       1,867       2,046       2,191       2,325       2,457       2,586       2,708       2,824       2,931  

Taxes

    (388     (408     (419     (413     (457     (483     (508     (532     (555     (576

EBIAT

    1,232       1,459       1,627       1,778       1,868       1,974       2,077       2,176       2,269       2,355  

Plus: Depreciation & Amortization

    416       423       452       473       511       507       500       488       474       456  

Less: Capital Expenditures

    (328     (340     (354     (386     (389     (407     (423     (439     (453     (465

Less: Changes in Net Working Capital, Other operating adjustments and Pension contributions

    (217     (224     (241     (230     (209     (204     (197     (190     (182     (172

Unlevered Free Cash Flow

    1,103       1,318       1,485       1,635       1,781       1,871       1,956       2,036       2,109       2,174  

 

(1) Rockwell Collins’ fiscal year end is the Friday closest to September 30.
(2) The information in this table gives effect to the Financial Accounting Standards Board’s new revenue recognition standards, which will be effective for Rockwell Collins beginning in 2019 (with early adoption permitted, but not earlier than 2018).

EBIT is defined as earnings before interest and income taxes. For purposes of the forecasts, EBIT is the same as operating earnings.

EBITDA is defined as earnings before interest, tax, depreciation and amortization.

EBIAT is defined as earnings before interest and after taxes.

Free cash flow is defined as net cash flow from operations minus capital expenditures.

Unlevered free cash flow is defined as EBIAT plus depreciation and amortization, less capital expenditures and less changes in net working capital, other operating adjustments and pension contributions.

Each of the foregoing metrics (EBIT, EBITDA, EBIAT, free cash flow and unlevered free cash flow) is a non-GAAP financial measure and none of these metrics should be considered as an alternative to operating income or net income as a measure of operating performance or cash flow or as a measure of liquidity.

Important Information About Unaudited Prospective Financial Information

The prospective financial information contained in this section “—Certain Rockwell Collins Unaudited Prospective Financial Information,” which is referred to as the prospective financial information, constitutes forward-looking information. While the prospective financial information was prepared in good faith and based on information available at the time of preparation, no assurance can be made regarding actual future events. The estimates and assumptions underlying the prospective financial information involve judgments with respect to, among other things, future economic, competitive, regulatory and financial market conditions and future business decisions that may not be realized and that are inherently subject to significant uncertainties and contingencies, including, among others, risks and uncertainties described in the sections of this proxy statement/prospectus

 

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entitled “Risk Factors” beginning on page 39 and “Cautionary Note Regarding Forward Looking Statements” beginning on page 37, all of which are difficult to predict and many of which are beyond the control of Rockwell Collins. There can be no assurance that the underlying assumptions or projected results will be realized, and actual results will likely differ, and may differ materially, from those reflected in the prospective financial information, whether or not the merger is completed. As a result, the prospective financial information cannot be considered predictive of actual future operating results, nor should it be construed as financial guidance, and this information should not be relied on as such.

Except as described above, the prospective financial information was prepared solely for internal use by Rockwell Collins or its financial advisors. The prospective financial information is the responsibility of the management of Rockwell Collins, and was not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information, published guidelines of the SEC regarding projections and forward-looking statements and the use of non-GAAP measures or GAAP. The inclusion of the prospective financial information in this proxy statement/prospectus is not an admission or representation by Rockwell Collins that such information is material or that the results contained in such information will be achieved. The prospective financial information does not reflect any impact of the merger or the other transactions contemplated by the merger agreement.

No independent registered public accounting firm has examined, compiled or otherwise performed any procedures with respect to the prospective financial information and, accordingly, no independent registered public accounting firm has expressed any opinion or given any other form of assurance with respect thereto and no independent registered public accounting firm assumes any responsibility for the prospective financial information or its achievability. The reports of the independent registered public accounting firm incorporated by reference into this proxy statement/prospectus relate to the historical financial information of Rockwell Collins and B/E Aerospace. Such reports do not extend to the prospective financial information and should not be read to do so. The independent registered public accounting firm disclaims any association with the prospective financial information. By including in this proxy statement/prospectus the prospective financial information, neither UTC, Rockwell Collins nor any of their advisors or other representatives, including J.P. Morgan and Citigroup, has made or makes any representation to any person regarding the ultimate performance of Rockwell Collins in the future compared to such information contained herein. Such information covers multiple years and such information by its nature becomes less predictive and subject to greater uncertainty with each succeeding year.

The prospective financial information is not included in this proxy statement/prospectus in order to induce any Rockwell Collins shareowner to vote in favor of the merger proposal or any of the other proposals to be voted on at the special meeting or to influence any shareowner to make any investment decision with respect to the merger.

EXCEPT AS MAY BE REQUIRED BY FEDERAL SECURITIES LAWS, UTC, ROCKWELL COLLINS AND THEIR RESPECTIVE ADVISORS DO NOT INTEND TO UPDATE, AND EXPRESSLY DISCLAIM ANY RESPONSIBILITY TO UPDATE, OR OTHERWISE REVISE, THE ABOVE PROSPECTIVE FINANCIAL INFORMATION TO REFLECT CIRCUMSTANCES EXISTING SINCE THEIR PREPARATION OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE UNDERLYING ASSUMPTIONS ARE SHOWN TO BE IN ERROR OR NO LONGER APPROPRIATE (EVEN IN THE SHORT TERM) OR TO REFLECT CHANGES IN GENERAL ECONOMIC OR INDUSTRY CONDITIONS.

In light of the foregoing and the uncertainties inherent in the prospective financial information, shareowners of Rockwell Collins are cautioned not to place undue, if any, reliance on such information.

 

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Interests of Directors and Executive Officers of Rockwell Collins in the Merger

In considering the recommendation of the Rockwell Collins Board that shareowners vote “FOR” the merger proposal, shareowners should be aware that Rockwell Collins’ directors and executive officers have interests in the merger that may be different from, or in addition to, those of Rockwell Collins shareowners generally. The Rockwell Collins Board was aware of these interests and considered them, among other matters, in approving the merger agreement and recommending that the shareowners adopt the merger agreement and approve the merger.

The following discussion sets forth certain of these interests in the merger of each person who has served as a non-employee director or executive officer of Rockwell Collins since October 1, 2015. The amounts presented in the following discussion do not reflect the impact of applicable withholding or other taxes.

Treatment of RSU Awards

As of November 30, 2017, the last practicable date before the filing of this proxy statement/prospectus, non-employee directors and executive officers of Rockwell Collins held an aggregate of 491,243 RSU awards (assuming achievement of the applicable performance metrics at target levels).

Upon completion of the merger, each then-outstanding RSU award that was granted (i) prior to September 4, 2017 or (ii) to a non-employee director of Rockwell Collins will become fully vested and will be canceled in exchange for the right to receive the merger consideration in respect of each share of common stock subject to such RSU award (with the number of shares subject to any performance-based RSU award deemed to be equal to the target number of shares subject to such award), less applicable tax withholdings. Pursuant to the merger agreement, after September 4, 2017, Rockwell Collins is permitted to continue to provide annual director compensation, including stock based compensation, in the ordinary course of business consistent with past practice. On October 2, 2017, Rockwell Collins granted 1,091 RSU awards to certain non-employee directors of Rockwell Collins in lieu of a portion of their annual cash retainer fees that otherwise would have been on that date. Upon the completion of the merger, all RSU awards then held by the non-employee directors, including RSU awards granted after September 4, 2017, will become fully vested and will be canceled in exchange for the right to receive the merger consideration in respect of each share of common stock subject to such RSU awards.

In addition, pursuant to the merger agreement, after September 4, 2017, Rockwell Collins is permitted to grant certain annual equity awards to employees of Rockwell Collins, including the executive officers of Rockwell Collins. On November 13, 2017, Rockwell Collins granted annual equity awards for fiscal year 2018 to the executive officers of Rockwell Collins in the form of 65,612 performance-based Company RSU awards (assuming achievement of the applicable performance metrics at target levels) providing for three year cliff vesting and 65,612 time-based RSU awards providing for annual installment vesting over three years. Each RSU award provides for immediate accelerated vesting and settlement upon a termination of employment without “cause” or for “good reason” following a change of control. For purposes of these awards, “cause” and “good reason” have the same meanings as those set forth in the award agreements for performance-based Rockwell Collins RSUs awards granted to executive officers in November 2016. For additional information with respect to RSU awards that may be granted to the executive officers of Rockwell Collins pursuant to the merger agreement after September 4, 2017, please see “—Equity Grants During the Interim Period Prior to Completion of the Merger” beginning on page 89. Upon completion of the merger, each RSU award granted to the executive officers of Rockwell Collins after September 4, 2017 will be assumed by UTC and converted into a time-based restricted stock unit award of UTC covering the number of shares of UTC common stock (rounded down to the nearest whole number of shares) equal to the product obtained by multiplying (a) the number of shares of Rockwell Collins common stock subject to the RSU award (with the number of shares subject to any performance-based RSU award deemed to be equal to the target number of shares subject to such award) by (b) the equity award exchange ratio. Each restricted stock unit award of UTC received in such conversion will be subject to the vesting schedule applicable to the corresponding RSU award and will be settled as provided in the

 

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award agreement applicable to corresponding RSU award, subject only to the continued service of the grantee with UTC or the surviving corporation through each applicable vesting date (except in the event of an earlier qualifying termination of service), but will not be subject to any performance conditions following the completion of the merger.

Assuming for this purpose that the completion of the merger occurred on November 30, 2017, the last practicable date before the filing of this proxy statement/prospectus, the following table provides information regarding the aggregate number of shares of common stock subject to outstanding RSU awards held by the non-employee directors and executive officers of Rockwell Collins as of such date that will, with respect to each RSU award that was granted to an executive officer of Rockwell Collins prior to September 4, 2017 or to a non-employee director of Rockwell Collins, become fully vested and canceled in exchange for the right to receive the merger consideration upon completion of the merger, and with respect to each RSU award granted to an executive officer of Rockwell Collins after September 4, 2017, be assumed by UTC and converted into a time-based restricted stock unit award of UTC in accordance with the terms and conditions of the merger agreement as described above.

 

Name    Number of
Shares
Underlying
Rockwell Collins
RSU Awards
Vested and
Cancelled for
Merger
Consideration (1)
     Estimated Value
of
Rockwell Collins
RSU Awards
Vested and
Cancelled for
Merger

Consideration (2)
     Number of
Shares
Underlying
Rockwell Collins
RSU Awards

Converted Into
UTC RSU
Awards (3)
     Estimated Value
of
Rockwell Collins
RSU Awards
Converted Into

UTC RSU
Awards (2)
 

Non-Employee Directors

           

Anthony J. Carbone

     44,302      $ 5,800,461        —        $ 0  

Chris A. Davis

     44,315      $ 5,802,163        —        $ 0  

Ralph E. Eberhart

     20,649      $ 2,703,574        —        $ 0  

John A. Edwardson

     15,312      $ 2,004,800        —        $ 0  

Richard G. Hamermesh

     2,047      $ 268,014        —        $ 0  

David Lilley

     34,313      $ 4,492,601        —        $ 0  

Andrew J. Policano

     25,329      $ 3,316,326        —        $ 0  

Cheryl L. Shavers

     22,057      $ 2,887,923        —        $ 0  

Jeffrey L. Turner

     12,040      $ 6,576,397        —        $ 0  

John T. Whates

     2,047      $ 268,014        —        $ 0  

Named Executive Officers

           

Robert K. Ortberg

     58,128      $ 7,610,699        54,736      $ 7,166,584  

Patrick E. Allen

     11,964      $ 1,566,447        11,998      $ 1,570,899  

Kent L. Statler

     12,541      $ 1,641,993        8,248      $ 1,079,911  

Philip J. Jasper

     11,401      $ 1,492,733        7,498      $ 981,713  

Robert J. Perna

     7,408      $ 969,929        7,498      $ 981,713  

10 Other Executive Officers

     36,166      $ 4,735,214        41,246      $ 5,400,311  

 

(1) Amounts shown in this column represent shares underlying time and performance-based RSU awards granted to the executive officers of Rockwell Collins prior to September 4, 2017 and to non-employee directors prior to November 30, 2017. For each such RSU award subject to performance vesting conditions, the amounts included in this column represent the target number of shares subject to such award. Amounts shown in this column do not include shares underlying any time and performance-based RSU awards granted to the executive officers of Rockwell Collins after September 4, 2017.
(2) For purposes of calculating these estimated values, the value of each share of common stock subject to an RSU award is assumed to be equal to $130.93, which was Rockwell Collins’ average per share closing market price over the first five business days following the first public announcement of the merger on September 4, 2017.

 

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(3) Amounts shown in this column represent shares underlying time and performance-based RSU awards granted to the executive officers of Rockwell Collins on November 13, 2017. For each such RSU award subject to performance vesting conditions, the amounts included in this column represent the target number of shares subject to such award. Amounts shown in this column do not include shares underlying any other time and performance-based RSU awards that may be granted pursuant to the merger agreement to the executive officers of Rockwell Collins after November 30, 2017.

Treatment of Stock Options

As of November 30, 2017, the last practicable date before the filing of this proxy statement/prospectus, executive officers of Rockwell Collins held an aggregate of 352,410 unvested stock options. Upon completion of the merger, each then-outstanding stock option will be canceled in exchange for the right to receive the merger consideration in respect of each net option share subject to such stock option, less applicable tax withholdings. The number of net option shares is calculated by subtracting from the total number of shares of Rockwell Collins common stock subject to such stock option a number of shares of Rockwell Collins common stock with a value equal to the aggregate applicable exercise price.

Assuming for this purpose that the completion of the merger occurred on November 30, 2017, the last practicable date before the filing of this proxy statement/prospectus, the following table provides information regarding the aggregate number of shares of common stock subject to outstanding unvested stock options held by the executive officers of Rockwell Collins as of such date that will be canceled in exchange for the right to receive the merger consideration upon completion of the merger.

 

Name    Number of
Shares
Underlying
Unvested Stock
Options
     Estimated
Value of
Unvested Stock
Options (1)
 

Named Executive Officers

     

Robert K. Ortberg

     147,834      $ 6,333,475  

Patrick E. Allen

     30,800      $ 1,318,800  

Kent L. Statler

     31,734      $ 1,360,064  

Philip J. Jasper

     28,867      $ 1,237,189  

Robert J. Perna

     19,001      $ 813,722  

10 Other Executive Officers

     94,174      $ 4,012,779  

 

(1) For purposes of calculating these estimated values, the value of each stock option is assumed to be equal to the number of shares of Rockwell Collins common stock subject to each stock option multiplied by the excess of $130.93, which was Rockwell Collins’ average per share closing market price over the first five business days following the first public announcement of the merger on September 4, 2017, over the applicable exercise price of such stock option.

Treatment of DSU Awards

As of November 30, 2017, the last practicable date before the filing of this proxy statement/prospectus, executive officers of Rockwell Collins held an aggregate of 24,305 DSU awards. Each executive officer is fully vested in his or her DSU awards.

Upon completion of the merger, each then-outstanding DSU award that is payable in cash by its terms upon the completion of the merger will be canceled in exchange for the right to receive a lump sum cash payment equal to the product of the value of the merger consideration and the number of shares of common stock relating to such DSU award, less applicable tax withholding. For this purpose, the value of the portion of the merger consideration that consists of shares of UTC common stock will be equal to the product of the number of such shares of UTC common stock and the UTC stock price. In addition, upon completion of the merger, each then-

 

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outstanding DSU award that is payable in shares of common stock by its terms upon the completion of the merger will be canceled in exchange for the right to receive the merger consideration in respect of each share of common stock relating to such DSU award, less applicable tax withholding.

Assuming for this purpose that the completion of the merger occurred on November 30, 2017, the last practicable date before the filing of this proxy statement/prospectus, the following table provides information regarding the aggregate number of shares of common stock subject to outstanding DSU Awards held by the executive officers of Rockwell Collins as of such date that are payable by their terms upon the completion of the merger and that will be canceled in exchange for the right to receive the merger consideration or the cash value of the merger consideration, as the case may be, upon completion of the merger.

 

Name    Number of
Shares
Underlying
DSU Awards
Payable Upon
Completion of the
Merger
     Estimated Value of
DSU Awards
Payable in Stock (1)
     Estimated Value of
DSU Awards
Payable in Cash (1)
 

Named Executive Officers

        

Robert K. Ortberg

     4,042             $ 529,219  

Patrick E. Allen

     3,226             $ 422,380  

Kent L. Statler

     3,008             $ 393,837  

Philip J. Jasper

     1,992             $ 260,813  

Robert J. Perna

     268             $ 35,089  

10 Other Executive Officers

     11,658             $ 1,526,382  

 

(1) For purposes of calculating these estimated values, the value of each share of common stock subject to a DSU award is assumed to be equal to $130.93, which was Rockwell Collins’ average per share closing market price over the first five business days following the first public announcement of the merger on September 4, 2017.

In addition, upon completion of the merger, each then-outstanding DSU award that is not payable by its terms upon completion of the merger will be assumed by UTC and converted into a deferred stock unit award of UTC covering a number of shares of UTC common stock (rounded down to the nearest whole number of shares) equal to the product obtained by multiplying (i) the number of shares of Rockwell Collins common stock subject to the DSU award by (ii) the equity award exchange ratio. Each deferred stock unit award of UTC received in such conversion will be settled in cash or shares of UTC common stock as provided in the applicable plan document on the date or dates provided under the applicable election.

 

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Assuming for this purpose that the completion of the merger occurred on November 30, 2017, the last practicable date before the filing of this proxy statement/prospectus, the following table provides information regarding the aggregate number of shares of common stock subject to outstanding DSU awards held by the executive officers of Rockwell Collins as of such date that are not payable by their terms upon the completion of the merger and that will be assumed by UTC and converted into deferred stock unit awards of UTC upon completion of the merger.

 

Name    Number of
Shares
Underlying
DSU Awards Converted
into UTC Deferred
Stock Units
     Estimated Value of
DSU Awards
Converted into UTC
Deferred Stock
Units (1)
 

Named Executive Officers

     

Robert K. Ortberg

     19      $ 2,488  

Patrick E. Allen

     21      $ 2,750  

Kent L. Statler

     71      $ 9,296  

Philip J. Jasper

     —        $ —    

Robert J. Perna

     —        $ —    

10 Other Executive Officers

     —        $ —    

 

(1) For purposes of calculating these estimated values, the value of each share of common stock subject to a DSU award is assumed to be equal to $130.93, which was Rockwell Collins’ average per share closing market price over the first five business days following the first public announcement of the merger on September 4, 2017.

Treatment of Restricted Stock Awards

As of November 30, 2017, the last practicable date before the filing of this proxy statement/prospectus, non-employee directors of Rockwell Collins held an aggregate of 23,029 restricted stock awards. As of the completion of the merger, each then-outstanding restricted stock award will become fully vested and will be canceled and converted into the right to receive the merger consideration in respect of each share of common stock subject to such restricted stock award, i.e. , treating such shares in the same manner as all other outstanding shares of common stock (other than excluded shares) for such purposes.

Assuming for this purpose that the completion of the merger occurred on November 30, 2017, the last practicable date before the filing of this proxy statement/prospectus, the following table provides information regarding the aggregate number of shares of common stock subject to outstanding restricted stock awards held by the non-employee directors of Rockwell Collins as of such date that will become fully vested and canceled in exchange for the right to receive the merger consideration upon completion of the merger.

 

Name    Number of
Restricted
Stock Awards
     Estimated Value
of
Restricted Stock
Awards (1)
 

Non-Employee Directors

     

Anthony J. Carbone

     11,984      $ 1,569,065  

Chris A. Davis

     6,413      $ 839,654  

Ralph E. Eberhart

     —        $ 0  

John A. Edwardson

     —        $ 0  

Richard G. Hamermesh

     —        $ 0  

David Lilley

     —        $ 0  

Andrew J. Policano

     —        $ 0  

Cheryl L. Shavers

     4,632      $ 606,468  

Jeffrey L. Turner

     —        $ 0  

John T. Whates

     —        $ 0  

 

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(1) For purposes of calculating these estimated values, the value of each share of Rockwell Collins common stock subject to a restricted stock award is assumed to be equal to $130.93, which was Rockwell Collins’ average per share closing market price over the first five business days following the first public announcement of the merger on September 4, 2017.

Equity Grants During the Interim Period Prior to Completion of the Merger

If the completion of the merger occurs on or after November 1, 2018 and prior to February 1, 2019, then on the later of the first business day in January 2019 and the 10th business day following the completion of the merger, UTC will grant equity awards in respect of shares of UTC common stock to employees who received ordinary course RSU awards in November 2017, including the executive officers of Rockwell Collins, on terms and conditions generally consistent with the UTC equity compensation program for grants made by UTC in the first quarter of 2019. However, if the completion of the merger occurs on or after February 1, 2019, Rockwell Collins may grant annual equity awards on the same terms as those that applied to the ordinary course November 2017 RSU awards described above. For executive officers, the grant date fair value of such RSU awards may generally not exceed the grant date fair value of his or her November 2017 RSU award.

Consideration Payable for Shares of Rockwell Collins Common Stock and Vested Equity Awards Converted Pursuant to the Merger Agreement

As of November 30, 2017, the last practicable date before the filing of this proxy statement/prospectus, the directors and executive officers of Rockwell Collins beneficially owned, in the aggregate, 1,784,523 shares of Rockwell Collins common stock (or approximately 1.10% of the outstanding shares as of such date), which includes shares underlying vested stock options and DSU awards, but does not include shares underlying outstanding restricted stock awards, unvested RSU awards and unvested stock options. Each share of Rockwell Collins common stock issued and outstanding immediately prior to the completion of the merger (other than excluded shares) will be converted into the right to receive the merger consideration. Rockwell Collins vested stock options and DSU awards will generally be converted into the right to receive the merger consideration, in each case, in accordance with the terms and conditions of the merger agreement as described above. For additional information with respect to the shares of Rockwell Collins common stock beneficially owned by the directors and executive officers of Rockwell Collins, please see the Beneficial Ownership Table on page 152.

Potential Severance Payments Upon a Qualifying Termination Following Completion of the Merger

Rockwell Collins has entered into change of control agreements with each of its executive officers, referred to as the change of control agreements. Each change of control agreement is automatically renewed each year with a one year term unless 60-days advance notice of non-renewal is given prior to the renewal date. Each change of control agreement provides for the continued employment of the executive officer for two years after the change of control generally on terms and conditions no less favorable than those in effect before the change of control. The completion of the merger will constitute a change of control for purposes of the change of control agreements. Each change of control agreement provides that upon a termination of the executive officer’s employment by Rockwell Collins other than for “cause” or by the executive officer for “good reason,” each as defined in the change of control agreements, within 2 years following a change of control, the executive officer will be entitled to receive the following payments in a cash lump sum:

 

    an amount equal to the product of (i) the executive officer’s average annual bonus percentage payout for the last three full fiscal years prior to the change of control and (ii) the executive officer’s annual base salary, such product referred to as the average annual bonus, multiplied by a fraction, the numerator of which is the number of days in current fiscal year though the termination date, and the denominator of which is 365;

 

   

an amount equal to the product of 3 times (for Messrs. Ortberg, Allen and Statler and 3 other executive officers who are not named executive officers and were appointed prior to April 2012, and 2 times for

 

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Messrs. Jasper and Perna and the 7 remaining executive officers who are not named executive officers who were hired after April 2012) the sum of (a) the executive officer’s annual base salary and (b) the executive officer’s average annual bonus;

 

    an amount equal to the equivalent of the benefit under the Rockwell Collins’ qualified defined contribution retirement plan and any excess or non-qualified retirement savings plans in which the executive officer participates which the executive officer would receive if the executive officer’s employment continued for the number of years equal to the executive officer’s severance multiple after the termination date; and

 

    an amount equal to the total projected cost to Rockwell Collins of providing welfare benefits that would otherwise have been provided had the executive officer’s employment continued for the number of years equal to the executive officer’s severance multiple after the termination date, after gross up for all applicable income and payroll taxes to the extent the underlying benefits would have otherwise been tax-free.

In addition, each executive officer is entitled to receive reimbursement for reasonable outplacement services as incurred, the scope and provider of which will be selected by the executive officer.

Each change of control agreement provides that if any payment under the change of control agreement would be subject to the excise tax imposed by Section 280G of the Code, then the executive officer may elect to reduce the payments by an amount that would reduce or eliminate such excise tax. The change of control agreements do not provide for excise tax gross-ups.

The following table provides information for the executive officers of Rockwell Collins, assuming for this purpose that the completion of the merger and the executive officer’s termination date occurred on November 30, 2017, the last practicable date before the filing of this proxy statement/prospectus, regarding the value of certain severance payments and benefits that would be payable to the executive officers upon a termination of employment by Rockwell Collins without cause or by the executive officer for good reason within 2 years following the completion of the merger.

 

Name    Pro-Rated
Bonus (1)
     Cash
Severance
     Retirement
Benefit
     Welfare
Benefit
     Out-placement
Services (2)
     Total  

Named Executive Officers

                 

Robert K. Ortberg

   $ 270,444      $ 7,914,690      $ 612,000      $ 73,501      $ 25,000      $ 8,895,635  

Patrick E. Allen

   $ 106,052      $ 3,874,455      $ 323,000      $ 73,501      $ 25,000      $ 4,402,008  

Kent L. Statler

   $ 92,068      $ 3,605,947      $ 308,612      $ 73,501      $ 25,000      $ 4,105,128  

Philip J. Jasper

   $ 77,470      $ 2,022,790      $ 173,119      $ 47,473      $ 25,000      $ 2,345,852  

Robert J. Perna

   $ 61,586      $ 1,652,546      $ 101,854      $ 47,473      $ 25,000      $ 1,888,459  

10 Other Executive Officers

   $ 573,319      $ 17,603,086      $ 1,151,286      $ 706,018      $ 250,000      $ 20,283,709  

 

(1) Assuming that the executive officer’s termination date occurs on the date of the completion of the merger, the executive officer may waive his or her entitlement to receive this payment in exchange for the right to receive the pro-rated bonus contemplated by the merger agreement, as described in the section entitled “—Payment of Pro-Rata Bonuses Upon Completion of the Merger” beginning on page 90.
(2) These amounts were estimated at $25,000 for each executive officer. The actual cost of outplacement assistance could vary.

Payment of Pro-Rata Bonuses Upon Completion of the Merger

Pursuant to the merger agreement, immediately prior to the completion of the merger, Rockwell Collins may pay annual incentive bonuses at target levels to employees, including the executive officers of Rockwell Collins, prorated for the number of days in the fiscal year in which the completion of the merger occurs through

 

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the date of the such completion, provided that no executive officer may receive a prorated bonus upon a termination of employment under his or her change of control agreement for the same period of time with respect to which he or she received a pro-rata bonus upon the completion of the merger, and each executive officer must execute a waiver to this effect as a condition to receiving the pro-rata bonus upon the completion of the merger.

The following table provides information for the executive officers of Rockwell Collins, assuming for this purpose that the completion of the merger occurred on November 30, 2017, the last practicable date before the filing of this proxy statement/prospectus, regarding the value of pro-rata bonus payments that would be payable to each executive officer upon the completion of the merger.

 

Name    Pro-Rated
Bonus
 

Named Executive Officers

  

Robert K. Ortberg

   $ 255,699  

Patrick E. Allen

   $ 98,806  

Kent L. Statler

   $ 87,049  

Philip J. Jasper

   $ 73,246  

Robert J. Perna

   $ 57,378  

10 Other Executive Officers

   $ 493,501  

Retention Bonus Program

Two executive officers who are not named executive officers have been granted retention bonus awards equal to $285,000 and $280,000, respectively. Each retention bonus award will vest and be paid in two equal installments on the date of the completion of the merger and the date that is 12 months following the date of the completion of the merger. Each retention bonus award will be subject to the recipient’s continued employment on each vesting date, subject to accelerated vesting and payment upon an earlier termination of employment after the date of the completion of the merger without “cause” or for “good reason,” in each case as defined in the retention bonus award letter, or due to death or disability.

Payout of Deferred Compensation Amounts Upon Completion of the Merger

Pursuant to the terms of certain Rockwell Collins nonqualified deferred compensation plans, certain executive officers of Rockwell Collins will receive payouts of their interests in such plans upon the completion of the merger. Each executive officer is fully vested in his or her interests in such plans.

In addition, upon a change of control, certain participants in the Rockwell Collins 2005 Non-Qualified Pension Plan, including certain executive officers of Rockwell Collins, who have attained age 50 but not age 55 at the time of a change of control are eligible to receive an additional early retirement subsidy payable under the Rockwell Collins 2005 Non-Qualified Pension Plan. Assuming for this purpose that the completion of the merger occurred on November 30, 2017, this value is estimated to be $24,000 for Mr. Allen, $34,000 for Mr. Statler and $6,000 in the aggregate for 3 other executive officers who are not named executive officers.

Benefits Continuation Pursuant to the Merger Agreement

Pursuant to the merger agreement, for the 12-month period following the completion of the merger, UTC must provide employees who are actively employed by (or on a legally protected or approved leave of absence from) Rockwell Collins immediately prior to the completion of the merger, for so long as such employees remain employed by UTC during such 12-month period, with compensation (including salary or base rate of compensation, annual cash bonus opportunities, commissions and severance) and benefits that are substantially comparable in value, in the aggregate, to the compensation (excluding any retention, change of control, transaction or similar bonuses) and benefits (excluding any defined benefit pension plan but including any retiree medical and life insurance benefits) being provided by Rockwell Collins immediately prior to the completion of

 

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the merger, except that, effective on or after January 1, 2019, UTC may modify the compensation and benefits provided to employees who were employees of B/E Aerospace, Inc. and its subsidiaries as of April 13, 2017, referred to as legacy B/E Aerospace employees, to make the compensation and benefits provided to such legacy B/E Aerospace employees substantially comparable in value, in the aggregate, to those provided to other similarly situated employees of Rockwell Collins and its subsidiaries (other than such legacy B/E Aerospace employees) immediately prior to the completion of the merger.

Restrictive Covenant Agreements

Executive officers of Rockwell Collins are subject to certain restrictive covenants with Rockwell Collins that apply upon termination of employment, including confidentiality restrictions, mutual arbitration agreements and non-competition covenants and employee non-solicitation covenants. An executive officer could lose all outstanding long-term incentives and/or be required to refund various long-term incentive benefits realized in the prior two-year period for breaching these non-compete or non-solicitation restrictions. However, the terms of such restrictive covenant agreements will terminate upon the occurrence of a change of control and, thus, will cease to be effective upon the completion of the merger.

New Employment and Compensation Arrangements with UTC

Mr. Ortberg has been designated the chief executive officer of the combined aerospace systems business of UTC and Rockwell Collins following completion of the merger. Certain other executive officers of Rockwell Collins may become officers or employees or otherwise be retained to provide services to UTC or the surviving corporation.

Any executive officers who become officers or employees or who otherwise are retained to provide services to UTC or the surviving corporation may enter into new individualized compensation arrangements and may participate in cash or equity incentive or other benefit plans maintained by UTC or the surviving corporation. As of the date of this proxy statement/prospectus, no new individualized compensation arrangements between such persons and UTC or the surviving corporation have been established.

Indemnification and Insurance

The merger agreement provides that, for six years following the completion of the merger, UTC or the surviving corporation will provide current and former directors and officers of Rockwell Collins with exculpation, indemnification and advancement of expenses no less favorable than currently provided by equivalent provisions of the Rockwell Collins’ certificate of incorporation and Rockwell Collins’ by-laws as in effect immediately prior to the completion of the merger. In addition, prior to the merger, Rockwell Collins or UTC will cause the surviving corporation as of or after the completion of the merger, to purchase a six-year prepaid policy, with terms, conditions, retentions and limits of liability that are no less favorable than the coverage provided under Rockwell Collins’ existing policies of directors’ and officers’ liability insurance and fiduciary liability insurance, with respect to matters arising on or before the completion of the merger, including in connection with the merger agreement and the transactions contemplated thereby (provided that UTC will not pay, and the surviving corporation will not be required to pay, in excess of 300% of the last annual premium paid by Rockwell Collins prior to the date of the merger agreement in respect of such policy).

Quantification of Potential Payments

The following table sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for each of the named executive officers, which are referred to as NEOs, of Rockwell Collins that: (i) is based on or otherwise becomes payable immediately prior to, or upon the completion of, the merger, assuming for this purpose that the completion of the merger occurred on November 30, 2017, the last practicable date before the filing of this proxy statement/prospectus, (ii) becomes payable upon the termination of

 

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employment of such NEO assuming that such termination is a qualifying termination and occurs immediately after the completion of the merger, as well as additional amounts payable in connection with the termination or (iii) otherwise relates to the merger. The following table does not include any amount that would be payable upon any termination of service that is not in connection with the merger.

Golden Parachute Compensation

 

Name

   Cash (1)      Equity (2)      Pension/
NQDC (3)
     Perquisites/
Benefits (4)
     Total  

Robert K. Ortberg

   $ 8,185,134      $ 21,110,758      $ 612,000      $ 98,501      $ 30,006,393  

Patrick E. Allen

   $ 3,980,507      $ 4,456,146      $ 347,000      $ 98,501      $ 8,882,154  

Kent L. Statler

   $ 3,698,015      $ 4,081,968      $ 342,612      $ 98,501      $ 8,221,096  

Philip J. Jasper

   $ 2,100,260      $ 3,711,635      $ 173,119      $ 72,473      $ 6,057,487  

Robert J. Perna

   $ 1,714,042      $ 2,765,364      $ 101,854      $ 72,473      $ 4,653,733  

 

(1) Amounts shown reflect the cash lump sum severance payment and pro-rata bonus under the NEO’s change of control agreement. For Mr. Ortberg, the amount in this column represents a cash severance payment equal to $7,914,690 and a pro-rata bonus equal to $270,444. For Mr. Allen, the amount in this column represents a cash severance payment equal to $3,874,455 and a pro-rata bonus equal to $106,052. For Mr. Statler, the amount in this column represents a cash severance payment equal to $3,605,947 and a pro-rata bonus equal to $92,068. For Mr. Jasper, the amount in this column represents a cash severance payment equal to $2,022,790 and a pro-rata bonus equal to $77,470. For Mr. Perna, the amount in this column represents a cash severance payment equal to $1,652,546 and a pro-rata bonus equal to $61,581. The cash lump sum severance payments and pro-rata bonus included in this column are double-trigger benefits that will be paid upon a qualifying termination of employment within 2 years following a change of control. Amounts in this column do not reflect any additional payments in respect of the pro-rated bonus payable at target levels upon completion of the merger pursuant to the merger agreement, since under the assumptions used for purposes of this table, the executive officer would not be entitled to receive this payment in addition to the pro-rata bonus payable under the NEO’s change of control agreement and will not have executed a waiver as described in the section entitled “—Payment of Pro-Rata Bonuses Upon Completion of the Merger” beginning on page 90. None of the NEOs have been granted a retention bonus award.
(2)

Amounts shown reflect the estimated value received by the NEOs in respect of unvested RSU awards and unvested stock options, as more fully described above under “—Treatment of RSU Awards” and “—Treatment of Stock Options.” These estimated values are calculated using a per share price of Rockwell Collins common stock equal to $130.93, which was Rockwell Collins’ average per share closing market price over the first five business days following the first public announcement of the merger on September 4, 2017. The amounts included in this column in respect of stock options and unvested RSU awards granted prior to September 4, 2017 are single-trigger benefits that will be paid pursuant to the merger agreement upon the completion of the merger. The amounts included in this column in respect of unvested RSU awards granted to the executive officers of Rockwell Collins on November 13, 2017 are double-trigger benefits; such awards will be assumed by UTC and converted into time-based restricted stock unit awards of UTC that vest on a qualifying termination following a change of control, as described above. For Mr. Ortberg, the amount in this column represents payments of $7,610,699, $7,166,584, and $6,333,475 for his single-trigger RSU awards, double-trigger RSU awards, and unvested stock options, respectively. For Mr. Allen, the amount in this column represents payments of $1,566,447, $1,570,898, and $1,318,800 for his single-trigger RSU awards, double-trigger RSU awards, and unvested stock options, respectively. For Mr. Statler, the amount in this column represents payments of $1,641,993, $1,079,911, and $1,360,064 for his single-trigger RSU awards, double-trigger RSU awards, and unvested stock options, respectively. For Mr. Jasper, the amount in this column represents payments of $1,492,733, $981,713, and $1,237,189 for his single-trigger RSU awards, double-trigger RSU awards, and unvested stock options, respectively. For Mr. Perna, the amount in this column represents payments of $969,929, $981,713 and $813,722 for his

 

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  single-trigger RSU awards, double-trigger RSU awards, and unvested stock options, respectively. Amounts in this column do not reflect the value received by the NEOs in respect of any fully vested stock options or fully vested DSU awards.
(3) Amounts shown reflect the value of an additional 3 years (2 years in the case of Messrs. Jasper and Perna) of contributions to the Rockwell Collins Retirement Savings Plan and the Rockwell Collins 2005 Non-Qualified Savings Plan due under the NEO’s change of control agreement, which are as follows for each NEO: $612,100 for Mr. Ortberg, $323,000 for Mr. Allen, $308,612 for Mr. Statler, $173,119 for Mr. Jasper and $101,854 for Mr. Perna. These amounts are double-trigger benefits that will be paid upon a qualifying termination of employment within 2 years following a change of control. In addition, amounts shown for Messrs. Allen and Statler include the value of an additional early retirement subsidy estimated to be $24,000 and $34,000, respectively, payable under the Rockwell Collins 2005 Non-Qualified Pension Plan, as described above under “—Payout of Deferred Compensation Amounts Upon Completion of the Merger.” These amounts are single-trigger benefits that come due upon the completion of the merger.
(4) Amounts shown reflect the cost of providing welfare benefits that would otherwise have been provided had the NEO’s employment continued for 3 years (2 years in the case of Messrs. Jasper and Perna) following the date of termination of employment, after gross up for all applicable income and payroll taxes to the extent the underlying benefits would have otherwise been tax-free, due under the NEO’s change of control agreement as follows: $73,501 for each of Messrs. Ortberg, Allen and Statler, and $47,473 for Messrs. Jasper and Perna. In addition, amounts shown also reflect an estimate of outplacement assistance expenses which are due under the NEO’s change of control agreement in the amount of $25,000 for each NEO. The amounts included in this column are all double-trigger benefits that will be paid upon a qualifying termination of employment within 2 years following a change of control.

Director and Officer Indemnification

Under the merger agreement, certain indemnification and insurance rights exist in favor of Rockwell Collins’ current and former directors and officers. See “Interests of Directors and Executive Officers of Rockwell Collins in the Merger—Indemnification and Insurance” beginning on page 92 for information about these rights.

Financing of the Merger and Treatment of Existing Debt

In connection with the merger, UTC currently intends to maintain Rockwell Collins’ existing revolving credit facility, term loan facility and outstanding notes. UTC is expected to assume approximately $7.2 billion of Rockwell Collins’ outstanding debt.

UTC’s obligation to complete the merger is not conditioned upon its obtaining financing. UTC anticipates that approximately $15 billion will be required to pay the aggregate cash portion of the merger consideration to the Rockwell Collins shareowners and to pay fees and expenses relating to the merger. UTC intends to fund the cash component of the merger through debt financing and cash on hand. In connection with entering into the merger agreement, UTC entered into a commitment letter, dated as of September 4, 2017, with Morgan Stanley Senior Funding, Inc., Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, HSBC Bank USA, National Association and HSBC Securities (USA) Inc., that provided a one-year commitment, subject to an extension to eighteen months under certain circumstances, for a $6.5 billion 364-day unsecured bridge loan facility. On October 6, 2017, in accordance with, and consistent with the terms set forth in, the commitment letter, UTC entered into a $6.5 billion 364-day unsecured bridge loan credit agreement, with the lenders party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent. The commitments under the bridge credit agreement terminate on September 4, 2018 or, under certain circumstances, on March 4, 2019. The bridge loan commitment will be reduced to the extent that UTC obtains certain other debt financing, completes certain asset sales (subject to customary reinvestment rights) and completes certain equity issuances, in each case, subject to a minimum proceeds threshold.

 

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Regulatory Approvals

Under the HSR Act and related rules, certain transactions, including the merger, may not be completed until notifications have been given and information furnished to the Antitrust Division and the FTC and all statutory waiting period requirements have been satisfied. Completion of the merger is subject to the expiration or earlier termination of the applicable waiting period under the HSR Act without the imposition of an unacceptable condition. UTC and Rockwell Collins each filed their respective HSR Act notification forms on September 28, 2017. On October 30, 2017, UTC and Rockwell Collins each received a request for additional information and documentary material, often referred to as a “second request,” from the Antitrust Division under the HSR Act.

Completion of the merger is further subject to notification or receipt of certain other regulatory approvals, including notification, clearance and/or approval in the European Union, Brazil, Canada, China, Japan, the Philippines, Russia, South Korea, Taiwan and Turkey and under the foreign investment laws of France. In addition, it is currently expected that regulatory approvals may be solicited and filings may be made in certain other jurisdictions.

At any time before or after the expiration of the statutory waiting periods under the HSR Act, the Antitrust Division or the FTC may take action under the antitrust laws, including seeking to enjoin the completion of the merger, to rescind the merger or to conditionally permit completion of the merger subject to regulatory conditions or other remedies. In addition, non-U.S. regulatory bodies and U.S. state attorneys general could take action under other applicable regulatory laws as they deem necessary or desirable in the public interest, including, without limitation, seeking to enjoin or otherwise prevent the completion of the merger or permitting completion subject to regulatory conditions. Private parties may also seek to take legal action under regulatory laws under some circumstances. There can be no assurance that a challenge to the merger on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.

Timing of the Merger

The transaction is expected to be completed by the third quarter of calendar year 2018. Neither UTC nor Rockwell Collins can predict, however, the actual date on which the transaction will be completed because it is subject to conditions beyond each company’s control, including obtaining the necessary regulatory approvals.

See “The Merger Agreement—Conditions to the Merger” beginning on page 120.

U.S. Federal Income Tax Consequences

The following is a discussion of the material U.S. federal income tax consequences of the merger to U.S. holders and non-U.S. holders (each as defined below) of Rockwell Collins common stock who hold their stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). The summary is based on the Code, the U.S. Treasury Regulations promulgated under the Code, and administrative rulings and court decisions in effect as of the date of this proxy statement/prospectus, all of which are subject to change, possibly with retroactive effect, and any such change could affect the accuracy of the statements and conclusions set forth in this discussion.

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of Rockwell Collins common stock that is, for U.S. federal income tax purposes, (1) a citizen or individual resident of the United States, (2) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof, or the District of Columbia, (3) an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source or (4) a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) the trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person for U.S. federal income tax purposes. A “non-U.S. holder” means a beneficial owner of Rockwell Collins common stock that is neither a U.S. holder nor a partnership for U.S. federal income tax purposes.

 

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This summary is not a complete description of all the tax consequences of the merger and, in particular, does not address the U.S. federal income tax considerations applicable to holders of Rockwell Collins common stock who are subject to special treatment under U.S. federal income tax law (including, for example, partnerships (or entities or arrangements treated as partnerships for U.S. federal income tax purposes) and partners therein, financial institutions, dealers in securities, insurance companies, tax-exempt entities or governmental organizations, regulated investment companies, real estate investment trusts, controlled foreign corporations, passive foreign investment companies, U.S. expatriates, former long-term residents of the United States, U.S. holders whose functional currency is not the U.S. dollar, tax-qualified retirement plans, holders deemed to hold Rockwell Collins common stock under the constructive sale provisions of the Code, holders who acquired Rockwell Collins common stock pursuant to the exercise of an employee stock option or right or otherwise as compensation and holders who hold Rockwell Collins common stock as part of a hedge, straddle, conversion, or other integrated transaction). In addition, no information is provided with respect to the tax consequences of the merger under the U.S. federal estate, gift, Medicare, and alternative minimum tax laws, or any applicable state, local, or non-U.S. tax laws. This summary does not address the tax consequences to holders of Rockwell Collins common stock who exercise appraisal rights in connection with the merger under the DGCL or the tax consequences of any transaction other than the merger.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Rockwell Collins common stock, the tax treatment of a partner in such partnership generally will depend on the status of the partner and the activities of the partnership. Any entity treated as a partnership for U.S. federal income tax purposes that holds Rockwell Collins common stock, and any partners in such partnership, should consult their own independent tax advisors regarding the tax consequences of the merger to their specific circumstances.

The tax consequences of the merger will depend on your specific situation. You should consult your own tax advisors as to the U.S. federal income tax consequences of the merger to you in light of your particular circumstances, as well as the applicability and effect of the alternative minimum tax and any state, local, and non-U.S. income or other tax laws and of any changes in those laws.

Consequences to U.S. Holders

The receipt of the merger consideration by U.S. holders in exchange for shares of Rockwell Collins common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, for U.S. federal income tax purposes, a U.S. holder who receives the merger consideration in exchange for shares of Rockwell Collins common stock pursuant to the merger will recognize gain or loss in an amount equal to the difference, if any, between (1) the sum of the fair market value of the UTC common stock plus the amount of cash received and (2) the U.S. holder’s adjusted tax basis in its Rockwell Collins common stock exchanged therefor.

Such gain or loss will be capital gain or loss and, if a U.S. holder’s holding period in the shares of Rockwell Collins common stock surrendered in the merger is greater than one year as of the date of the merger, will be long-term capital gain or loss. Long-term capital gains of certain non-corporate holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of a capital loss recognized on the exchange is subject to limitations. If a U.S. holder acquired different blocks of Rockwell Collins common stock at different times or different prices, such U.S. holder must determine its adjusted tax basis and holding period separately with respect to each block of Rockwell Collins common stock.

A U.S. holder’s aggregate tax basis in UTC common stock received in the merger generally will equal the fair market value of the UTC common stock as of the completion of the merger. The holding period of the UTC common stock received in the merger generally will begin on the day after the merger.

Notwithstanding the above, in certain circumstances, the receipt of the cash consideration by U.S. holders of Rockwell Collins common stock that also actually or constructively own UTC common stock may be subject to

 

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Section 304 of the Code if holders who own (including by attribution) 50% or more of the Rockwell Collins common stock before the merger own (including by attribution), immediately after the merger, 50% or more of the UTC common stock. If Section 304 of the Code applies to the cash consideration received in the merger, to the extent a U.S. holder would otherwise be treated for U.S. federal income tax purposes as selling Rockwell Collins common stock to UTC for cash, such holder will instead be treated as receiving the cash consideration from UTC in deemed redemption of shares of UTC common stock deemed issued to such holder. If such deemed redemption is treated as having the effect of a distribution of a dividend under the tests set forth in Section 302 of the Code (discussed below under “—Consequences to Non-U.S. Holders”), then a U.S. holder generally would recognize dividend income up to the amount of the cash received. In the event of such treatment, non-corporate U.S. holders may be eligible for a reduced rate of taxation on any such deemed dividend arising under Section 304 of the Code, subject to exceptions for short-term and hedged positions, while corporate U.S. holders may be treated as receiving an “extraordinary dividend” within the meaning of Section 1059 of the Code. It is not certain whether Section 304 of the Code will apply to the merger, because it is not certain whether shareholders who own (including by attribution) 50% or more of the Rockwell Collins common stock before the merger will own (including by attribution) 50% or more of the UTC common stock immediately after the merger. Further, it may not be possible to establish with certainty following the closing whether or not Section 304 of the Code applied to the merger because the ownership information necessary to make such determination may not be available. In addition, if Section 304 of the Code applies to the merger, because the possibility of dividend treatment depends upon each holder’s particular circumstances, including the application of the constructive ownership rules described below under “—Consequences to Non-U.S. Holders”, U.S. holders of Rockwell Collins common stock that also actually or constructively own UTC common stock should consult their tax advisors regarding the application of the foregoing rules to their particular circumstances, and any actions that may be taken to mitigate the potential application of such rules.

Consequences to Non-U.S. Holders

In general, the U.S. federal income tax consequences of the merger to non-U.S. holders will be the same as those described above for U.S. holders, except that, subject to the discussion below regarding potential dividend treatment, a non-U.S. holder generally will not be subject to U.S. federal income tax on any gain recognized on the receipt of the merger consideration in exchange for shares of Rockwell Collins common stock pursuant to the merger, unless:

 

    such gain is “effectively connected” with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to the non-U.S. holder’s permanent establishment in the United States);

 

    the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of the exchange and certain other conditions are met; or

 

    the non-U.S. holder owned, directly or under certain constructive ownership rules of the Code, more than 5% of the outstanding shares of Rockwell Collins common stock at any time during the five-year period preceding the merger, and Rockwell Collins is, or has been during the shorter of the five-year period preceding the merger or the period that the non-U.S. holder held Rockwell Collins common stock, a “United States real property holding corporation” within the meaning of the Code.

Gain described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis, at generally applicable U.S. federal income tax rates. Any gain described in the first bullet point above of a non-U.S. holder that is a corporation may also be subject to an additional “branch profits tax” at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty). A non-U.S. holder described in the second bullet point immediately above will be subject to tax at a flat rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) on any gain recognized, which may be offset by U.S.-source capital losses recognized in the same taxable year. If the third bullet point above applies to a non-U.S. holder, gain recognized by such holder will be subject to U.S. federal income tax on a net income basis,

 

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at generally applicable U.S. federal income tax rates. Rockwell Collins believes that it has not been, is not, and will not be, at any time during the five-year period preceding the merger, a “United States real property holding corporation.”

As discussed above under “—Consequences to U.S. Holders,” if Section 304 of the Code applies to the merger, the cash consideration received in the merger would be treated as having been received in a deemed redemption of shares of UTC common stock deemed issued. Such deemed redemption generally would be treated as having the effect of a distribution of a dividend if the receipt of the cash consideration by a holder is not “substantially disproportionate” with respect to such holder or is “essentially equivalent to a dividend” under the tests set forth in Section 302 of the Code. The determination of whether a holder’s receipt of the cash consideration is not “substantially disproportionate” generally requires a comparison of (x) the percentage of the outstanding stock of Rockwell Collins that the holder is deemed actually and constructively to have owned immediately before the merger and (y) the percentage of the outstanding stock of Rockwell Collins that is actually and constructively owned by such holder immediately after the merger (including indirectly as a result of owning stock in UTC and taking into account any shares of UTC actually and constructively owned by such holder prior to the merger, or otherwise acquired in connection with the transaction). The deemed redemption will generally result in a “substantially disproportionate” exchange with respect to a holder if the percentage described in clause (y) above is less than 80% of the percentage described in clause (x) above. Whether the deemed redemption results in an exchange that is “not essentially equivalent to a dividend” with respect to a holder will depend on such holder’s particular circumstances. Generally, if such deemed redemption results in a “meaningful reduction” in the holder’s percentage stock ownership of Rockwell Collins, as determined by comparing the percentage described in clause (y) above to the percentage described in clause (x) above, such deemed redemption will be considered “not essentially equivalent to a dividend.” The IRS has indicated in a revenue ruling that a minority shareholder in a publicly traded corporation will experience a “meaningful reduction” if the minority shareholder (i) has a minimal percentage stock interest, (ii) exercises no control over corporate affairs, and (iii) experiences any reduction in its percentage stock interest. In applying the above tests, a holder may, under constructive ownership rules, be deemed to own stock that is owned by other persons or stock underlying a holder’s option to purchase stock, in addition to the stock actually owned by the holder. In addition, as noted above, in applying the “substantially disproportionate” and “not essentially equivalent to a dividend” tests to a holder, sales (or purchases) of UTC common stock made by such holder (or by persons whose shares are attributed to such holder) in connection with the merger will be taken into account.

Any amount treated under these rules as a dividend paid to a non-U.S. holder generally would be subject to U.S. withholding tax at a rate of 30%, or such lower rate as may be specified by an applicable income tax treaty, unless such dividend is effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment of the non-U.S. holder in the United States). Because it may not be certain at the time of closing whether Section 304 of the Code applies to the merger, and because the application of Section 304 of the Code depends on a non-U.S. holder’s particular circumstances, withholding agents may not be able to determine whether (or to what extent) a non-U.S. holder is treated as receiving a dividend for U.S. federal income tax purposes. Therefore, withholding agents may withhold tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) on the gross amount of any cash merger consideration paid to a non-U.S. holder, unless (i) the withholding agent has established special procedures allowing non-U.S. holders to certify that they are exempt from such withholding tax and (ii) such non-U.S. holders are able to certify that they meet the requirements of such exemption (e.g., because such non-U.S. holders are not treated as receiving a dividend under the Section 302 tests described above). However, there can be no assurance that any withholding agent will establish such special certification procedures. If a withholding agent withholds excess amounts from the cash consideration payable to a non-U.S. holder, such non-U.S. holder may obtain a refund of any such excess amounts by timely filing an appropriate claim with the IRS. Non-U.S. holders should consult their own tax advisors regarding the application of the foregoing rules in light of their particular facts and circumstances, the procedures for claiming treaty benefits or otherwise establishing an exemption from U.S. withholding tax with respect to any portion of the cash consideration payable to them pursuant to the merger, and the possible

 

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desirability of selling their shares of Rockwell Collins common stock or UTC common stock (and considerations relating to the timing of any such sales).

Information Reporting and Backup Withholding

Payments of cash made in exchange for shares of Rockwell Collins common stock pursuant to the merger may be subject, under certain circumstances, to information reporting and backup withholding. To avoid backup withholding, a U.S. holder that does not otherwise establish an exemption should complete and return an Internal Revenue Service Form W-9, certifying under penalties of perjury that such U.S. holder is a “United States person” (within the meaning of the Code), that the taxpayer identification number provided is correct and that such U.S. holder is not subject to backup withholding.

A non-U.S. holder may be subject to information reporting and backup withholding on any cash received in exchange for Rockwell Collins common stock pursuant to the merger unless the non-U.S. Holder establishes an exemption, for example, by properly certifying its non-U.S. status on an appropriate Internal Revenue Service Form W-8.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against a holder’s U.S. federal income tax liability, if any, provided that such holder furnishes the required information to the Internal Revenue Service in a timely manner.

The tax consequences of the merger will depend on your specific situation. You should consult your own tax advisor with respect to the U.S. federal income tax consequences of the merger in light of your particular circumstances, as well as the applicability and effect of the alternative minimum tax and any state, local, and non-U.S. income or other tax laws and of any changes in those laws.

Accounting Treatment

UTC prepares its financial statements in accordance with GAAP. The merger will be accounted for as an acquisition of Rockwell Collins by UTC under the acquisition method of accounting in accordance with GAAP. UTC will be treated as the acquiror for accounting purposes.

All unaudited pro forma condensed combined financial information contained in this proxy statement/prospectus were prepared using the acquisition method of accounting. The final allocation of the purchase price will be determined after the merger is completed and after completion of an analysis to determine the estimated net fair value of Rockwell Collins’ assets and liabilities. Accordingly, the final acquisition accounting adjustments may be materially different from the unaudited pro forma adjustments. Any decrease in the estimated net fair value of the assets and liabilities of Rockwell Collins as compared to the unaudited pro forma information included in this proxy statement/prospectus will have the effect of increasing the goodwill recognized related to the merger.

NYSE Listing; Delisting and Deregistration of Rockwell Collins Common Stock

Prior to the completion of the merger, UTC has agreed to use its reasonable best efforts to cause the shares of UTC’s common stock to be issued in connection with the merger to be approved for listing on the NYSE. The listing of the shares of UTC’s common stock on the NYSE, subject to official notice of issuance, is also a condition to completion of the merger.

If the merger is completed, Rockwell Collins common stock will cease to be listed on the NYSE and Rockwell Collins common stock will be deregistered under the Exchange Act.

 

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Litigation Relating to the Merger

In connection with the merger, several lawsuits have been filed by purported Rockwell Collins shareowners. The lawsuits allege, among other things, that the Registration Statement on Form S-4 filed by UTC on October 10, 2017 misstates and/or omits material information. The lawsuits seek an injunction barring the merger, rescission of the merger in the event it has been consummated, recovery of damages and other relief.

The outcome of these lawsuits or any other lawsuit that may be filed challenging the merger is uncertain. One of the conditions to the closing of the merger is that no governmental authority has issued or entered any order after the date of the merger agreement having the effect of enjoining or otherwise prohibiting the consummation of the merger, and these lawsuits seek and potential other lawsuits may seek an order enjoining consummation of the merger. Accordingly, if these lawsuits or any future lawsuit is successful in obtaining an order enjoining consummation of the merger, then such order may prevent the merger from being completed, or from being completed within the expected time frame, and could result in substantial costs to UTC and Rockwell Collins including, but not limited to, costs associated with the indemnification of directors and officers. Any such injunction or delay in the merger being completed may adversely affect UTC’s and Rockwell Collins’ business, financial condition, results of operations and cash flows.

UTC’s Dividend Policy

The declaration of future dividends will at the discretion of the UTC Board and will be determined after consideration of various factors, including earnings, cash requirements, the financial condition of UTC and other factors deemed relevant by the UTC Board. While UTC cannot assure its future financial performance, it anticipates that it will continue to pay dividends on UTC stock in the foreseeable future. Most recently, UTC declared a quarterly dividend of $0.70 per UTC share, which was paid on September 10, 2017 to holders of record on August 18, 2017. Under the merger agreement, prior to the completion of the merger, UTC may continue to pay its regular quarterly cash dividends in the ordinary course consistent with past practice (subject to increase by no more than 15% on a quarterly basis).

Restrictions on Sales of Shares of UTC Common Stock Received in the Merger

All shares of UTC common stock received by Rockwell Collins shareowners in the merger will be freely tradable for purposes of the Securities Act and the Exchange Act, except for shares of UTC common stock received by any Rockwell Collins shareowner who becomes an “affiliate” of UTC after completion of the merger (such as Rockwell Collins directors or executive officers who become directors or executive officers of UTC after the merger). This proxy statement/prospectus does not cover resales of shares of UTC common stock received by any person upon completion of the merger, and no person is authorized to make any use of this proxy statement/prospectus in connection with any resale.

 

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THE MERGER AGREEMENT

This section describes the material terms of the merger agreement. The descriptions of the merger agreement in this section and elsewhere in this proxy statement/prospectus are qualified in their entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A and is incorporated by reference into this proxy statement/prospectus. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. You are encouraged to carefully read the entire merger agreement.

Explanatory Note Regarding the Merger Agreement

The merger agreement is included to provide you with information regarding its terms. Neither the merger agreement nor the summary of its material terms included in this section is intended to provide any factual information about UTC or Rockwell Collins. Factual disclosures about Rockwell Collins and UTC contained in this proxy statement/prospectus and/or in the public reports of Rockwell Collins and UTC filed with the SEC (as described in the section entitled “Where You Can Find More Information” beginning on page 174) may supplement, update or modify the disclosures about Rockwell Collins and UTC contained in the merger agreement. The merger agreement contains representations and warranties and covenants of the parties customary for a merger of this nature. The representations and warranties contained in the merger agreement were made only for purposes of the merger agreement as of the specific dates therein; were made solely for the benefit of the parties to the merger agreement; may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the merger agreement instead of establishing these matters as facts; and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the merger agreement except for the limited purposes expressly set forth therein and should not rely on the representations and warranties or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of representations and warranties may change after the date of the merger agreement, which subsequent information may or may not be fully reflected in UTC’s or Rockwell Collins’ public disclosures. Accordingly, the representations and warranties in the merger agreement should not be relied on by any persons as characterizations of the actual state of facts about Rockwell Collins or UTC at the time they were made or otherwise.

Structure of the Merger

The merger agreement provides that, upon the terms and subject to the conditions set forth in the merger agreement, and in accordance with the DGCL, at the completion of the merger, Merger Sub will be merged with and into Rockwell Collins. As a result of the merger, the separate corporate existence of Merger Sub will cease, and Rockwell Collins will continue as the surviving corporation and a direct or indirect wholly owned subsidiary of UTC. The certificate of incorporation of Rockwell Collins, as in effect immediately prior to the completion of the merger, will be amended and restated in its entirety as set forth in Exhibit A to the merger agreement and, as so amended and restated, will be the certificate of incorporation of the surviving corporation. The by-laws of Merger Sub, as in effect immediately prior to the completion of the merger, will be the by-laws of the surviving corporation, except with respect to the name of the surviving corporation, which shall be “Rockwell Collins, Inc.”

Merger Consideration

At the completion of the merger, upon the terms and subject to the conditions set forth in the merger agreement, each share of Rockwell Collins common stock issued and outstanding immediately prior to the completion of the merger (other than (1) shares held by Rockwell Collins as treasury stock, UTC, or any subsidiaries of Rockwell Collins or UTC and (2) shares held by a holder who has properly exercised and

 

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perfected (and not effectively withdrawn or lost) such holder’s demand for appraisal rights under the DGCL, both of which are collectively referred to herein as excluded shares) will be converted into the right to receive the merger consideration, which is:

 

    $93.33 in cash, without interest, from UTC; plus

 

    a fraction of a share of UTC common stock equal to the quotient obtained by dividing $46.67 by the average of the volume-weighted average prices per share of UTC common stock on the NYSE (as reported by Bloomberg L.P. or, if not reported on Bloomberg L.P., in another authoritative source mutually selected by Rockwell Collins and UTC) on each of the 20 consecutive trading days ending with the trading day immediately prior to the closing date, which is referred to as the UTC stock price, subject to adjustment based on a two-way collar mechanism described below.

The fraction of a share of UTC common stock into which each share of Rockwell Collins common stock (other than excluded shares) will be converted is referred to as the exchange ratio. The exchange ratio will be calculated based upon the UTC stock price. If the UTC stock price is greater than $107.01 but less than $124.37, the exchange ratio will be equal to the quotient of (a) $46.67 divided by (b) the UTC stock price, which, in each case, will result in the stock consideration having a value equal to $46.67. If the UTC stock price is less than or equal to $107.01 or greater than or equal to $124.37, then a two-way collar mechanism will apply, pursuant to which, (1) if the UTC stock price is greater than or equal to $124.37, the exchange ratio will be fixed at 0.37525 and the value of the stock consideration will be greater than $46.67, and (2) if the UTC stock price is less than or equal to $107.01, the exchange ratio will be fixed at 0.43613 and the value of the stock consideration will be less than $46.67.

The following table sets forth an illustrative range of the potential merger consideration based on various UTC stock prices, ranging from $97.00 to $137.00, which reflect the 52-week stock price range for UTC common stock as of November 30, 2017, plus or minus approximately 10 percent, as applicable. The highlighted rows represent the UTC stock price values that are within the two-way collar mechanism described above.

 

UTC

Stock Price

   Exchange
Ratio
   Value of Stock
Consideration
per share of
Common Stock
   Cash
Consideration
per share of
Common Stock (1)
   Total
Consideration

$  97.00

   0.43613    $42.30    $93.33    $135.63

$100.00

   0.43613    $43.61    $93.33    $136.94

$103.00

   0.43613    $44.92    $93.33    $138.25

$106.00

   0.43613    $46.23    $93.33    $139.56