America's Largest Helicopters May Be for Sale. But Should United Technologies Discard Its Crown Jewel?

Why United Technologies might sell its Sikorsky brand and America's largest helicopter -- the CH-53E Super Stallion.

Feb 2, 2014 at 5:45PM

Have you heard the news? United Technologies (NYSE:UTX) may soon sell or spin off its Sikorsky helicopter division.

Rumors of the whirlybird spinoff sparked heated debate among investors: Is it true that United Tech will unload one of its best-known brands? And if so, why? (And for how much?)

The answer to that last question is pretty easy. A true industrial conglomerate, United Technologies owns such valuable brands as Otis elevators, Carrier air conditioners, Pratt & Whitney engines -- and, of course, Sikorsky helicopters. As a whole, the company is valued at 1.65 times annual sales.

But historically, high-quality defense companies -- and United Technologies is the eighth biggest defense contractor in the world -- tend to sell for only about one-times their annual sales. With $6.2 billion in revenue recorded over the past year, a separate Sikorsky division would therefore probably be valued at about $6.2 billion -- a significant discount to the valuation of United Technologies as a whole. And this would be true whether Sikorsky is sold to an acquirer like Boeing (NYSE:BA), Textron (NYSE:TXT), or Britain's BAE Systems (NASDAQOTH:BAESY) -- or whether it gets spun off as an independent entity.

As for the other questions, though, those are a bit trickier. In the following slides, we'll lay out for you the pros and possible cons of a decision by United Technologies to unload Sikorsky. Read on, and prepare to be amazed -- and make sure to check out our special free report at the end. 

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Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of Textron. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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