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UTX to Divest Power Systems Biz

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United Technologies Corp. (UTX - Free Report) recently announced the signing of an agreement to divest its Pratt & Whitney Power Systems unit, which is currently a part of Pratt & Whitney, to Mitsubishi Heavy Industries (MHI). With the divestiture of its Power Systems Unit, United Technologies intends to better focus on its aerospace and commercial businesses.

The terms of the deal remained undisclosed but the transaction is expected to close by the second quarter of 2013, subject to regulatory approvals and customary closing conditions.  

Pratt & Whitney Power Systems unit primarily deals with the engineering, assembly and sales of aero-derivative gas turbines and also provides services related to gas turbines and engineering, procurement and construction of related power generation systems. This business is an excellent fit for Mitsubishi as it is mainly focused on gas turbines business 

Through this acquisition, Mitsubishi Heavy Industries is expected to expand its power generation product portfolio. Pratt & Whitney Power Systems aero-derivative gas turbines are highly recognized worldwide, for their integrated design and quick start-up time. Apart from this deal, both these companies have worked together for an aero-engine production.

Moreover, Mitsubishi is presently looking to establish a global structure to substantially increase manufacturing capacity of high temperature high-output gas turbines annually.

In 2012, Mitsubishi announced a Medium-Term Business Plan, to primarily set a policy for full utilization of its strengths and synergy. Thereby it reorganized its business segments into four domains. Among the four business domains, the company is currently considering the Energy & Environment segment to have the highest importance. The acquisition of Pratt & Whitney’s Pumps is a part of this business plan.

Pratt & Whitney, a division of United Technologies is leading player in the design, manufacture and service of aircraft engines, space propulsion systems and industrial gas turbines.

United Technologies currently has a Zacks Rank #3, implying a short-term Hold rating on the stock.

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