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From Antitrust Law Daily, October 2, 2018

U.S. conditionally approves UTC-Rockwell Collins combination

By Matt Pavich, J.D.

United Technologies Corporation (UTC) must divest two aerospace businesses in order to proceed with its acquisition of Rockwell Collins, the Department of Justice announced on October 1. The Department of Justice filed a civil lawsuit in the federal district court in Washington, D.C., seeking to enjoin the proposed acquisition. At the same time, a proposed consent decree was filed with the court that, if approved by the court, would resolve the competitive concerns alleged in the lawsuit (U.S. v. United Technologies Corp., Case 1:18-cv-02279).

The businesses to be divested are critical to the safe operation of aircraft. Pursuant to the terms of the proposed consent decree, UTC would divest Rockwell Collins’s pneumatic ice protection systems business. These systems remove ice from the wing of an aircraft through an inflatable rubber de-icing boot. UTC also would divest Rockwell Collins’s trimmable horizontal stabilizer actuators (THSAs) business. THSAs ensure that an aircraft maintains altitude during flight by adjusting the angle of the horizontal tail surface.

According to the Justice Department, absent the divestitures, the proposed acquisition would substantially lessen competition in the market for ice protection systems, by combining two of the world’s three suppliers of pneumatic ice protection systems, and in the market for THSAs, by combining two of the world’s leading THSA producers. Under the proposed settlement, UTC must divest the ice protection systems business to a government-approved acquirer and must divest Rockwell Collins’s THSA business to either Safran S.A., an established aerospace supplier, or an alternate government-approved acquirer approved.

Canada’s review. The Antitrust Division worked closely with Canada’s Competition Bureau during their respective investigations into the proposed acquisition. For its part, the Canada Competition Bureau announcedthat it had concluded its reviews and issued a No Action Letter (NAL) to the parties. That NAL states that at this time, the Bureau will not challenge the proposed acquisition, but the NAL terms are subject to the implementation of the proposed settlement between the U.S. Justice Department and the merging parties. Although the Bureau found that the proposed acquisition would likely have resulted in a substantial lessening of competition in the markets, it was satisfied that the proposed settlement would resolve Canadian competition concerns.

Attorneys: Soyoung Choe, U.S. Department of Justice, for the United States. Shawn R. Johnson (Crowell & Moring LLP) and Michael H. Byowitz (Wachtell, Lipton, Rosen & Katz) for United Technologies Corp. Clifford H. Aronson (Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates) for Rockwell Collins, Inc.

Companies: United Technologies Corp.; Rockwell Collins, Inc.; Safran S.A.

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