United Technologies Corp. announced Monday it plans to spin off or sell Stratford-based Sikorsky Aircraft, where about 8,000 Connecticut workers are employed.
“Our strategic review has confirmed that exiting the helicopter business is the best path forward for United Technologies,” UTC President and CEO Gregory Hayes said in a statement.
“Sikorsky is the world’s premier helicopter company and, through a series of strategic wins, is well-positioned for long-term growth,” he said. “However, a separation of Sikorsky from the portfolio will allow both United Technologies and Sikorsky to better focus on their core businesses.”
UTC officials will decide by the end of the third quarter whether the aircraft manufacturer will be spun off or sold, according to a company statement.
A spinoff is a way of creating a new, independent company. In the process, a company distributes 100 percent of its ownership interest in a business unit as a stock dividend to existing shareholders. In some cases, shareholders are offered a discount to exchange their shares in the parent company for shares of the spinoff’s stock.
“Over the coming weeks, we’ll determine whether a spinoff or direct sale is the best way to enhance Sikorsky’s long-term success and create the most value for customers and shareholders,” Hayes said.
Founded in the 1920s by Igor Sikorsky, Sikorsky Aircraft is headquartered in Stratford, where about 8,000 employees work. The company is known for making Black Hawk helicopters and the Marine One helicopter used by the president.
“Regardless of corporate structure, Sikorsky’s skilled and dedicated workforce will continue to produce the world’s best helicopters — a critical national security asset,” U.S. Sen. Richard Blumenthal said in a statement. “For both military and civilian uses, Sikorsky’s products are the gold standard, a fact unchanged by the planned shift in ownership.”
Blumenthal said he will “strongly support military budgets that recognize the vital vale of Sikorsky to our national defense” and is hopeful any potential new owner would keep Sikorsky in the state.
“Sikorsky can’t simply be lifted like a helicopter and moved elsewhere,” he said. “Its workforce is here and it’s the most skilled, dedicated workforce in the world producing helicopters today. That’s why its helicopters are the best in the world.”
U.S. Rep. Rosa DeLauro echoed that sentiment in a statement, saying, “Connecticut and Sikorsky have a long, mutually beneficial relationship dating back to 1929, with Connecticut supplying the lynchpin: the talented, dedicated men and women who make the best helicopters in the world and all the highly skilled local companies they work with. I expect that Sikorsky’s future leadership will recognize the value of this relationship and keep Sikorsky in Stratford.”
UTC likely is looking to spin off or sell Sikorsky because the aircraft business has produced “relatively low (profit) margins” for the parent company, according to David Cadden, professor emeritus at Quinnipiac University’s School of Business.
“The last reported profit margin for Sikorsky was 2.9 percent,” he said in a statement.
Several factors are contributing to declining margins, he said, including Congress’ sequestration lessening demand for new helicopters and decreasing military activities in Iraq and Afghanistan.
Earlier this month, Sikorsky announced plans to lay off 1,400 workers worldwide. At the time, company officials said falling oil prices have reduced demand for aircraft needed to transport workers to and from oil rigs.
But Sikorsky is developing several new products, including the CH-53K military heavy-lift helicopter and another aircraft that is a “tremendous candidate” for two U.S. Army programs.
“Future sales projections for Sikorsky appear to be particularly bright for the 2020-30 period,” he said. “Unfortunately, the CEO of UTC chose to look at the short-term rather than the long-term perspective.”
Elizabeth Regan contributed to this report.
