Mitsubishi Heavy Industries to Purchase Pratt & Whitney Power Systems from United Technologies

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Researched by Industrial Info Resources (Sugar Land, Texas)--At the start of this week, there were rumors around the trade show floor at Power-Gen International that Pratt & Whitney was being bought out. This morning, the rumors were confirmed when it was announced that United Technologies (NYSE:UTC) (Hartford, Connecticut), the parent company that owns Pratt & Whitney, has agreed to and is negotiating terms of sale of the Pratt & Whitney Power Systems unit with Mitsubishi Heavy Industries (MHI) (OTC:MHVYF) (Tokyo, Japan).

David Hess, president of Pratt & Whitney, said the sale was "a significant step in UTC's ongoing portfolio transformation." He added, "Pratt & Whitney Power Systems is a solid company with many talented employees, and we are pleased to place it with a company that will provide it with the resources and capabilities for future growth."

The sale will be subject to regulatory approval, and UTC is expecting the sale to close in the second quarter of 2013.

What does this move mean for both companies? UTC is changing its portfolio to concentrate on the aerospace business and recently completed an $18.4 billion purchase of aerospace parts maker Goodrich Corporation (Charlotte, North Carolina). Mitsubishi, on the other hand, is poised to become a key player in the power generation market. This is the second big move in the same month for Mitsubishi; earlier this month, the company announced it was merging its power division with Hitachi Limited (OTC:HTHIY) (Tokyo, Japan) in a joint venture company with Mitsubishi holding 65% and Hitachi 35%. This merger will be completed by January 2014.

For more information, view December 6, 2012, article - Mitsubishi Heavy and Hitachi Merge Power Divisions to Compete Globally.

It also means that MHI will have a massive U.S. presence almost overnight and that MHI has strengthened its aero division. Given the recent, and expected future, growth in natural gas-fired generation, all this could well mean increased competition between MHI and General Electric (NYSE:GE) (Fairfield, Connecticut).

Industrial Info was interested to see what kind of change or shift this purchase might cause the Wood Group/Pratt & Whitney joint venture, which was formed in 1998, to provide in plant services focusing on GG4/FT4 gas turbines. A spokesperson at the Wood Group stated this change would not affect the joint venture at all, and the Wood Group would continue the services it provides to Pratt & Whitney.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.