For decades, United Technologies
On Wednesday, UTC announced that it's taking a minority interest (no word on exactly how minor) in Eclipse Aerospace, maker of the Eclipse 500 "very light" business jet. Now, on the one hand, this might just be UTC "lending a helping hand" to a customer in distress. After all, Eclipse planes use Pratt & Whitney turbofans to power their flight. As a victim of the Great Recession, Eclipse can certainly use some help getting its business up and running once more after declaring bankruptcy in 2008.
By providing funds, UTC helps ensure that Eclipse won't slip back into bankruptcy. By providing support for the business, UTC also hopes to get Eclipse's manufacturing lines back in operation and get Eclipse buying Pratt &Whitney turbofans once more. Of course, by stepping in to help a customer in distress, UTC also protects its flank and prevents an increasingly acquisitive General Electric
Up, up, and away?
In short, there's every reason for UTC to do this deal, and no reason not to. Indeed, if the recent revival of business jet sales is any indication, this might be precisely the right time for UTC to make a move into the airplane market. Last month, we saw moderately bullish sales news at the business jet divisions of General Dynamics
By buying an interest in Eclipse, UTC puts itself in position to expand its investment if the recovery keeps picking up steam; perhaps even buying the entire company. (It wouldn't cost much; last time Eclipse went on the block it was snapped up for just $40 million.) Worst case, even if business jet sales sag, UTC has at least shored up its revenue stream with one customer.
Berkshire Hathaway is a Motley Fool Inside Value selection. Berkshire Hathaway and Embraer are Motley Fool Stock Advisor picks. The Fool owns shares of Berkshire Hathaway, General Dynamics, and Textron.
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