Fred Curado, CEO of Embraer

March 1, 2016, © Leeham Co. Embraer joined Airbus and Boeing in opposing the potential acquisition by Honeywell of United Technologies Corp.

• We’re at the 2016 ISTAT AGM in Phoenix and will be reporting on presentations and news from the sidelines.
• Update, 0800 MST: Honeywell withdrew its $90bn bid for United Technologies, it was announced this morning.

UTC rejected the merger—which came to light last week—but it is unclear if Honeywell will continue to pursue the idea.

UTC rejected the merger on price, governance and, from its perspective, the likelihood the US would reject the merger on anti-trust grounds. Honeywell believes the latter is not an issue, according to press reports.

Airbus and Boeing were quick to express opposition to the merger. Both companies are major suppliers to them and also according to press reports, they fear pricing consolidation.

Last week at the rollout of the Embraer E190-E2, EMB’s chief executive officer, Fred Curado, expressed the same concern and joined the Bog Two in opposition to the merger.

In an interview with LNC, Aviation Week and Flight International on the sidelines of the rollout, Curado was clear: a consolidation of this nature would not be in the best interests of Embraer.

“I don’t think that would be good for us,” he said. “I don’t think a merger would be really good for Embraer. They are major suppliers in the E2. That’s something we are carefully looking at.”

Aerospace analysts attending the ISTAT AGM yesterday in Phoenix gave the merger little chance of proceeding. One, who spoke only on condition of anonymity, said there was only a 15%-20% chance of the merger going forward.

Honeywell offered $108 per share. UTX closed yesterday at $96.96, down $1.04, after a brief run-up to $100 last week from $92 when word of the merger talks emerged.

The analyst thought that Honeywell would have to offer upwards of $125 to budge UTX off its rejection. However, he said he thought it unlikely Honeywell would go this high.

Credit Suisse, in a note published after the merger news, expects a higher price offer but would be surprised if it’s more than $120 per share. Credit Suisse thinks it likely UTX will remain independent and that there is only a small probability of a hostile bid by Honeywell.

CS believes the anti-trust issues may not be as great as UTX claims. There is about $10bn in revenue overlap between the two companies, according to the research note, and possibly $22bn more depending on potential divestitures. The combined companies would b e slightly larger than Boeing.