United Technologies Executive Departures Could Spark M&A

The departure of another top executive at United Technologies Corp. less than two months after the sudden resignation of its chief executive officer could signal the start of bigger shifts including possible acquisitions.

United Technologies said yesterday that Alain Bellemare, chief executive officer of UTC Propulsion & Aerospace Systems, is stepping down at the end of the month and his position will be eliminated. Bellemare had risen through the ranks after starting out in the Pratt & Whitney Canada unit and was a close colleague of former CEO Louis Chenevert, who left in November.

Their exits are among changes, including the appointment of a new head of strategic planning, that suggest the company could be poised to make a significant deal, said Jeffrey Sprague, an analyst with Vertical Research Partners LLC. Gregory Hayes, the former chief financial officer who became CEO in November, is “serious and impatient about creating value, and is putting his stamp on the company,” Sprague said in a note.

“We see a wide range of possible strategic actions from UTX, ranging from large scale M&A, to spinoffs or inversion mergers,” said Sprague, who has a buy rating on the stock. Sprague also said he “would not be surprised to see one or more other senior departures.”

John Moran, a spokesman for United Technologies, declined to comment.

Aviation Focus

United Technologies, based in Hartford, Connecticut, has refined its focus in recent years on aviation, including its Pratt & Whitney jet-engine unit and Sikorsky helicopter business, and building services, which covers its Otis elevators, Carrier climate-control and fire and security divisions. The company bought aerospace supplier Goodrich Corp. in 2012 for $16.5 billion.

With Hayes now in the top job replacing Chenevert, who was CEO for six years, the company’s growth prospects are increasingly in the spotlight.

In yesterday’s shift, the company promoted Mike Dumais, the head of one of its subsidiary businesses, to senior vice president of strategic planning. In that role, the former Bain & Co. manager will assess “opportunities for portfolio and organizational changes” while reporting directly to Hayes.

“We will review our portfolio in a disciplined and aggressive manner to ensure we continue to deliver increased shareowner value on a sustainable basis,” Hayes said yesterday in a statement.

Shares of United Technologies rose 2.3 percent to $116.15 at the close in New York. The stock rose 1.1 percent last year, trailing the 7.5 percent advance in the S&P 500 Industrials Index.

‘Strategic Changes’

Bellemare will continue as a consultant to the company, United Technologies said.

The departures of Bellemare and Chenevert suggest that “considerable strategic changes are envisaged at the company,” Julian Mitchell, a Credit Suisse Group AG analyst in New York, said today in a note.

“We think they underline the considerable scope for portfolio and capital allocation actions at the company, as well as the sense of urgency for such change,” said Mitchell, who rates the stock outperform. He cited the company’s Building & Industrial Systems business as a likely candidate to make an acquisition.

In a separate note, RBC Capital Markets analyst Robert Stallard, who rates the stock outperform, said “we think it more than likely that new CEO Greg Hayes is streamlining the organization and bringing up his own guard.”