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    Case 49 GE Honeywell PDF

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    General Electric’s Proposed Acquisition of Honeywell Yow got a commitment from our mamagenent ten dha’s dered w mae sis dhe most successful acquison in industrial history. And Tall you we're ging eo do that, and that’s cha’ going 0 Fagen hee. Look at prot ie hy prc ln, component By component by component, and there és no index by any calewaton ome can make anywhere that sys there 16 ome sue. From a cmrional stanpoine one might make « comment abn it But from any factual Base, this is de cleanest deal soul ever se -John F, Weleh Jen October 25, 2000” On March 1, 2001, Jessica Gallinelli, managing director of Baneroft Capital Man: agement, heard surprising and somewhat disturbing news about the proposed bid by General Electric Company (GE) for Honeywell International Ine. Despite recent pub- lic assurances about the deal from GE"s chair and CEO, John F. “Jack” Weleb Jt, the antitrust regulatory authority of the European Commission (EC) announced that i h initiated a review of the proposed merger. Gallinelli, whose Fund owned a kage stake in Honeywell, considered that major development and wondered whether Bancroft should alter its investment Immediately, Gallinelli insteucted her associate to provide background material fon the merger, an assessment of the probability that the merger woul! be approved by antitrust regulators in dhe United States and Europe, and valuation analyses (0 assist Gallinelli in assessing Bancroft’s investment in Honeywell. She needed to decide quickly whether to hold or sell her fund’s 10 million shares in Honeywell and its short position of 10 million shares in GE. As a risk arbitrageur, she thought prives would respond! rapidly fo the EC’s announcement, She remembered Jack Welch's conic "Froneywell eration In, U.S. Sects and Exchange Commission, ike No, LRT “Ths case was prepare fom pubic nxn by Solomon Eskiniz under the spcrision of Robert Bruner an wth the assistance of Sean D. Car I 8 wre aha fr ess dsctssion rather chan 0 itt efotve or netlestive hain fan ainsi situation, The representations of lesen Glin and Bancroft Capital Management ate ional. Copyight © 20 by the University of Virginia ‘Dsl Scho! Fondation, Charts, VA. AIT ight served Toner copie. snd an eon sales dardebusineaspbliaing.com. art of hs publication may be eprnaced stoned ba arial System, ase ina spreushcet, or asd any fom’ o by any means—elctmnc, mechani, pa ‘copying. reconting, or onherwise—widhont the perision of he Dalen Scho Foundation. Rev 918 707 frou five months earlier, when he said this was © tnd she wondered whether that were still the case 1e cleanest deal you'll ever see, Background on GE's Bid for Honeywell On Thursday, October 19, 2000, GE's Jack Welch was visiting the New York Stock Exchange (NYSE), when he noticed something unusual in Honeywell's stock price. {was looking at the ticker, and Honeywell's stock was up, like, 10 bucks.” h couldn't understand i”? A reporter explained that Honeywell and United ‘Tech rnologies Corporation (UTC) had just initiated merger discussions, Reportedly, UTC ‘would pay 0.74 shares of its own stock For each share of Honeywell, Such a merger ‘would create a company that could become a dominant supplier inthe aerospace mar ket and san effective competitor with GE, Welch hud been prepared for that news. Late the next morning, Welch called Honeywell’s: chair and CEO, Michael Bonsignore, to present GE'S own bid for Honeywell at a E21 share-forshare exchange ratio, After Honeywel UTC that GE had entered with a superior offer, UTC's chief executive, George David, (old Bonsignore that UTC would walk away from their deal if Honeywell's board did ‘aot approve the UTC merger proposal by 2:30 p.m, Honeywell could not meet that Uealline, however, and UTC dropped its offer, deciding not to enter into a bidding \war with GE. Exhibit I provides a timeline of the events surrounding the competing bids for Honeywell. Ext nd 3 offer a history of Honeywell, GE, and UTC stock priees during this pe On Satunlay, October 21, after he 'sattomeys told wing that Jack Weleh, who had been planning to retire, pledged to ret through the acquisition period, Honeywell's board agreed (0 the GE offer ata slightly inereased price of 1,035 GE sh shate of Honeywell, plus assumed debt. GE formally announced the deal on Sunday, October 22, 2000. ‘The company submitted the required regulatory filings to the U.S. Department of Justice (DOJ) on November 15, 2000, and notitied the EC of the pro- posed merger on February 4, 208) nas head of C res for each. General Electric Company? tn March 2001, General Electie was one of the largest and most diversitied con rations in the Work. It generated $130 billion in revenues in segments as diverse as sirerat engines, plates, financial services, and television production, Jack Welch had served isthe company’s iconic ei and CEO for the previous 20 years, doing which time he made GE the most valuable company in the world and led ito break one revenue and earings record afer another. Wele led more than 1,700 acquisitions and pushed GE into many new markets. $a Murray ot al, “Extended Tour On Eve of Reticment, Jack Welch Daves t Stk around Bit [lockiuser Move to Aogice Honeywell Puts Wrench in GE Secession Race—A Deal He Cold Ps Up” Wi Sve Journal, Otober 23, 2000, A “wupsisge.conventeompanyompninfvat a glances leader fceesed 19 December 205). case 9 ¢ rk Bletrc’s Proposed Aisin of Homeywell 700 ‘The company traced its ro0ts to 1876, when famed inventor Thomas Alva Edison ‘opened a laboratory in Menlo Park, New Jersey, that later became know a an i tion factory, where he developed a wide range of commercially successful electrical devices, By 1890, Edison had organized many of his businesses into the Edison General Electric Company, which merged with the Thomson-Houston Company in 1892 10 form the General Electric Company. GE was listed in the original Dow Jones Indus trial Index in 1896, and was the only company to have remained part of the index to date Honeywell International Ine. Honeywell International Inc, was & diversified tec ‘ation with $25 billion in revenues in segments that ineluded aerospace prod services, power generation systems, and specialty chemicals, It was formed upon the merger of AlliedSignal Ine. and Honeywell Inc, in December 1999, and employed approximately 120,000 people in 95 countries, cywell’s history began in 1885, when Albert Butz patented the J alarm, invented a thermostat called the “damper flapper.” and formed the Butz Thermo-Electric Regulator Company. The company was eventually acquired by the Minneapotis Heat Regulator Company, which merged with Honeywell Heat Specialty Company in 1927, That company became Honeywell Inc, in 1963. Amor ‘numerous innovations, the company invented the electeie autopilot and the round ther- ‘mostat, and it had operations related to gyroscopes, Security systems, and computers It acquired Sperry Aerospace in 1986 and had become a leader in certain aerospace markets by 2000, December 1999, Honeywell Inc. completed « $16 billion merger with in a deal widely praised by Wall Street analysts. The merger of Honeywell and AlliedSignal was expected to enhance the competitive strengths of each company, and the CEOs predicted that these synergies, combined with cost reduetions, would ease earnings per share by at least 20% per year. Six months after completion of however, Honeywell’s CEO, Michael Bonsignore, explained to investors that expected growth would not meet that prediction, and would insteal be in the 12% t0 149% range. Indeed, Honeywell board members did not think the company cou make Significant improvement for another 18 months to two years, and there was some talk 4 potential deal with a company such as UTC or GE could provide Bonsignore with an opportunity for “a graceful exit™ jology and manufacturing corpo- Merger Considerations Upon hearing the news of UTC’s offer for Honeywell, Jack Welch realized that such a combination could threaten GE's competitive position in several aerospace Is own bid for Honeywell, GE would not only keep Honeywell m0 Par Eh Valuing th Enters: Aeqisons and Buyouts ut of UTC's grasp, thereby prohibiting UTC from becoming the leading avionics and engines provider, but would also materially increase its own market power. As 4 top industry analyst observed at the time: “ the [aerospace] business as no other company has before, and given their likely profitability, it's hard co imagine how you would set up a competing entity of com- parable scale."* GE also expected to remain dominant in the From 1990 to 1999, it controlled $9% of the market, with its closest competitors Pratt & Whitney (a division of UTC) and Rolls-Royce ple far behind, at 16% and 13%, respectively. Honeywell would add to GE’s business portfolio another line of turbofan power plants concentrated in the lower-thrust class, in addition to a wide array of aircraft subsystems, such as avionics, environmental controls and 3 landing systems, inventory logistics services, repair and overhaul, and spare parts for the commercial aireraft market. Comparable firms and their relev in Exhibit 4, while comparable transactions appear in Exhibits 5 and 6. Welch was particularly enthusiastic about the potent companies, “Honeywell's core group of businesses—avionies, performance materials, and ils new mieroturbine technology—are a perfect comple- ment to four of GE's major businesses [Aircraft Engines, Industrial Systems, Plastics, and Power Systems],” Welch said, "Not only are the businesses a perfect fit, but so are the people and processes. GE's operating system and social architecture, coupled \with both companies’ common culture based on the initiatives of Six Signs globalization, and e-business are also a perfect fit Furthermore, cost and revenue synergies of $3 billion were projected t arise from GE's merger with Honeywell, ‘most likely through employee layofls and more efficient processes, Despite the potential merger benefits, there were also risks to consider, This would be the largest acquisition GE had ever contemplated, Although GE had established 3 reputation for its mergers and acquisitions expertise, its typical strategy was to purchase small companies that could be easily integrated, both structurally and culturally. Within Honeywell there were financial problems and cultural integration issues related to its recent merger with AlliedSignal, Honeywell also had certain low-margin, slow growth businesses that could drag down GE's historically high returns, Welch had t0 consider potential legal and political roadblocks as well, mainly antitrust concerns in both the United States and European Union (EU), and potential protectionist policies in the EU that would oppose inereasing the power of major American firms atket for commercial jet engines. ratios are given ies for the merged automated controls, Antitrust Concerns As of March 2001, American and European regulators had divergent views regarding corporate mergers. The DOJ assessed whether the merger would substantially lessen Aatony Veloce Se, “GE Ominanenvers UTC and Snares Haney Large Soale Mergers May Bis Back in Vogue inthe Aerospace Ins, and at his tage, I's Anybody’ Guess Whew his Next Round of Conslidation Might Lea Aviation Wek (tees 30, 200), 28, "Robt P Mater, General Electric Buy Honeywell” Conic (November 2:5 Case 49 General Eleie's Propose Aequisiion of Hopeywell 7 ‘competition, and how prices and prosluct innovation would subsequently be affected The legal standard for evaluating mergers in the EU, on the other hand, measured the ‘companies’ degree of industry dominance, and whether oF not the merged entity would have increased dominance in its associated industries, Procedural differences between the DOJ and the EC also affected their respec: five decision analyses. In the United States, even after the DOJ or the U.S. Federal Trade Commission approved a merger, other parties could still file lawsuits to prevent the deal. That was not the case in Europe, however, where the European Commission's decision 10 approve or block a merger was final. Further, whereas American authorities generally distegarded competitor complaints about a poten: tial deal and may have even considered them a reason to allow a deal, European horities respected the views of competitors and were willing to bar a deal due to their pleas. ‘The majority of media reports following the announcement of the proposed GE-Honeywell combination suggested that it presented no problems to antitrust ofli= cials, There was mininval overlap in the companies" aevospace products, and all other products were largely complementary. Certain observers, however, believed the deal \would raise antitrust scrutiny, especially in Europe. Antitrust officials did not typically endorse mergers between an industry's biggest players. In addition, various experts foresaw both vertical (a company’s ability to tie or bundle its products) and horizontal (overlapping product lines, such as jet-engine contols) antitrust concems. (On March 1, 2001, the European Commission made its surprising decision to ‘open a full investigation into the proposed GE-Honeywell transaction. ‘The EC's move \was a personal blow for Welch, who had spoken ewice the previous day with Mario Monti, the EC's antitrust chief, arguing that GE and Honeywell's produets were com: plementary an that “the tend toward open systems would allow ct and match’ different supplies.”” The EC's decision to challenge the merger destroyed GE's plans to complete the deal by March or April, and signaled that the companies might have to make significant concessions before obtaining approval Specifically, the EC expressed concerns over the inereased market power of the combined firm, snd the aelditional leverage that GE would have over competitors and customers, It Worried that the merged company could dominate the market for avionics, ‘on-board systems, and engines, with deep discounts pushing out competitors and the bundling of products forcing engine customers to purchase avionics through deals with GE's leasing sam, GE Capital Aviation Services (GECAS). The BC acknowledged that this increased competition would lower prices for customers in the short run, but expressed fear that GE's rivals would face eroding margins and not be able to keep up in the long run, thereby decreasing competition, reducing product development in the industry, and! enabling GE to increase prices. ‘The EC also announced plans to investigate the financial clout that GE could wield through GECAS, which purchased aircrafts that it later leased or sol to airlines and cargo cartiers. It was already one of the largest aircraft buyers in the world, tomers to “mis "choc A. Timer, “Europe May Oppose G loneywel Menge” Aviation Week (March , 2001): mm Pat tight Valuing the Enersne:Acsuisios and Buyouts ‘many industry oficias eared that the addition of Honeywell's products to GE's current product mix would give GECAS to much power over its customers, whieh it could leverage t0 sell more of the combined company’s products. A spokesman for GE said that GECAS bought a range of engines aside from GE models that aircraft purchasers could typically choose the engine brand they wanted installed on their sireralt, and that GE had been “ery careful for years” to avoid a conlict on the issue and had never faced antitrust problems,* Gallinelli’s Considerations Jessica Gallinelli won ered how the news from Europe would affect the value of hher fund's arbitrage position, which had remained long by 10 million shares of Honeywell” and short by 10 million shares of GE, with 70% oF invested capital bor rowed at 15% interest!” Just one point of opposition would be fatal 10 the deal. She ‘wondered what the probability was that both the DOJ and the BC would approve the ‘merger. Gallinelli planned to consider the regulators’ different methoxls and criteria when evaluating mergers, In addition, she intended to look at historical precedents 10 help prediet the outcome of the current case, Gallinelli noted began reviewing mergers in 1990, it only blocked one of more than 400 of those proposed bby American companies, namely the merger between WorldCom and Sprint. This deal was also blocked by American authorities, Gallinelti also planned to consider relevant personality and political issues. Mario Monti was known for opposing large mergers. Both Monti and the U.S. assistant attorney general, Charles James, liad personal interests in the outcome of the ease, as both their respective careers depended on their results as regulators, Jack Welch was respected by all but seen by many as extremely arrogant, and his attitude and approach to the merger could affect its outcome. The EC may not want two large American companies to gain more power relative {© Buropean competitors. On the other hand, the EC may not want to be responsible for harming the already tense U.S.-BU trade relationship. How would the unexpected news that the EC the deal affect the stock prices of GE and Honeywell? (EXhil vide a forecast of the financial performance for Honeywell and a completed valuation analysis. Capital market information appears in Exhibits LT and 12.) Should Bancrolt Capital Management sell its position in Honeywell, or should it maintain it? Should it alter its short position ia GE? sinee the was initiating an investigation of ts 7, 8, 9, and 10 pro- Philip Shishkin, “GE Parchas of Honeywell Faces Scutny in Earope—Cinpstiors Ave Const Ht Combined Fn Wil be ta Power fl” Wl Set dona 7 Febuary 2001, 422 “oions on Hotey wll’ sates were emt odin at pees at pled Woaiiis ranging fom 385 1 S17, wih ean of 20% red ino the long am hot postions sinalacousy on Osis 20 2000, Case 49 General Blete's Proposed Acqsition of Honeywell EXHIBIT 1 | GE-Honeywoll Timeline of Key Events Date Event (ctaber 19, 2000 “Media repors potential merger between United Technologies Company 'C) and Honeywell ney board moots fo seuss morgor with UTC + Jack Welch (GE's CEO) contacts Michael Bonsignore (Honeywalls CEO} to inaicate merger intrest at an exchange rato of 1:1 + Bonsignore tells UTC that Honeywell has received another proposal + UTC terminates discussions with Honeywell ae ‘Gatober 27, 2000 +” Welch meets with Bonsignore, increases the exchange rao to 1058 GE etiaros for ach Honeywel share + Honeywell board approves merger ‘Oetober 22, 2000 {+ GE board approves merger and announces Honeywell acquistion November 15,2000 {+ Ragulatory fling made wih US. Department of Justice (DOA) ~Fobruary 4, 2008 + European Commission (EC) notiied of proposed merger March 1, 2001 + EC intates review of proposed GE-Honeywel combination ‘Ostaber 20, 2000 74 Pare Bight Valuing the Eatepise: Acquistion an Buyouts EXHIBIT 2 | Trading History of GE, Honeywell, and UTC Stock Date HON sus. GE sus uTxsus S&P 500 index. 41-Sep-00 35.55 e271 5803 1920.77 5-Sep-00 3583 52.09 5733 4507.08 6-Sep.00 36.85, 53.16 5072 1,492.25 7865-00 3448 53.16 5943 11502551 8800.00 31.55 5396 5791 1.49450 11-Sep-00 53.79 snes 4409.26 12.S0p-00 5322 58.85, 1481.99 19-Sep-00 53.22 5890 1404 91 14Sep.00 53.16 59.90 1480.87 15:86p-00 5114 sad 1485.81 18S09.00, 51at 6025, 4aast 19-Sep-00 51.36 58.61 1459.90 20-Sep-00 51.03 59.43 14st 21-Sep-00 50.69 58.25, 1449.05 22.09.00 51.64 61.30 1443.72 2556-00 5290 e247 1439.05 26:$09-00, 5226 5282 1427.24 27-5040 53.56 6440 26.57 28-80p-00, 59.16 66.92 1458.20 29-80p-00 5221 e403 4.496.51 20000 son 63.88, 1436.23 3.02100 534 66.10 1426.46 402100 53.16 66.08 1434.32 5.00100 53.96 68.09 1436.28 6.02.00 53.68 6730 1406.99 9.000 5284 0857 1402.08 1.00100 52.44 erat 1387.02 11-0400 5115 66.92 11968 59 12.0c100 4922 5364 2978 13-0600 5143 6522 1374.17 16-0ct00 5216 57a 174.62 17-0<-00 50.24 6522 1319.97 18-0¢t00 50.18, 63.09 yana13 19.02.00 S024 5990 1388.75, 20-0ct-00 4708, cose 4396.93 28-0c-00 4499 59.43 1395.78 24-0ct-00 462% 6054 1300.13, 25-00-00 47a 59.90 1368.90 26-0ct-00 47.08 e224 1364.44 27-Oct-00 4719 294 137958 '30-0c-00 487 6448 1396.66 31-Oct-00 4950 65.94 1429.40 ‘-Nov-00 40.17 6423 aazi.22 2.Now00 4049 6434 1428.32 S-Nov-00 485, e282 1426.69 6.Nov-00 4922 85.34 1432.19 7-Nov-00 4962 sa70 131.87 8Nov-00 4920 63.35 1409.28 8.Nov-00 4928 eas 4,400.14 10-Nov-00 48.66, 61.95 1305.98 Chapter 49 Geneat Blt Propel Acquisition of Honeywell TAS EXHIBIT 2 | Trading History of GE, Honeywell, and UTC Stock (continued) ate HON sus GE sus urxsus. ‘SAP 500 Index +3.Nov-00 45.69 46.46 6183 1,951.26 14.Nov-00 4076 4764 6300 1382.95 15Nov-00 4654 4742 e298, 16-Nov-00 46.59 4759 6438 Y7-Nov-00 46.4 46.86 65.15, 20.Nov.00 4455 4821 4.00 24-Nov-00 4512 4584 85.73 22.Nov-00 4365, 4306 6591 24Nov.00 4399 4400 6755 27-Nov-00 43.09 aa7 65.68 26.Now00 aaa 4499 6421 2a.Nov-00 4370 re 65.15 0-Now-00 44:10 4476 66.50 1-02-00, 45.18 4606 6620 4Dee-00 45.0 4663, eta 5:Dee.00 47.09 49.00 7125 6:D0000 4789 4872 7078 7-Dec 00 4761 4932 7072 BDee00 49.30 49.85 70.25 1-Dee.00 4993 4995 6785, 12.0000 4716 4770 69.02 33.0000 4716 4787 6728 14Dec00 4574 46.46 55.85 35:Dec00 4231 4499 66.85 18-Dec-00 45.00 46,06 east 19.D0¢00 4422 4520 70.19 2o.De00 A161 4285 825 210000 4109 4924 70.43 22.De600 4320 4415, m7 26,000.00, 4042 4454 95 1315.19 27-D26-00 43.02 4367 74.80 1328.92 28:De600, 4337 4309 7389 1334.22 20-08-00, 42.80 43.44 rae 4.92020 2aanot 4003, 39.64 70.68 1,283.27 Sant 4354 4.32 7058 41.387 56 4anot 4348 43.55 69.08, 1393.34 Sant 42.46 4287 63.79 1206.38 Buanot 4133 4128 6798 1205.86 Salant 40.43 aoa 6622 100.80 sOvanot 4088 40.49 6785, 1313.27 11-Jan-01 42.86 429 oaa7 1326.62 t2Jan-o4 42.06 4140 65.38 1318.32 ve-Jan-01 4331 4203 6561 1326.65 Vrsdan-0t 4342 4231 6173 ise0.47 18Jan-o1 4422 4016, 6a6t sisar or 19van-0t 437 4259 65.73 iaast 2eJan-01 4257 4145, 67.50 1342.90 2aan-04 4331 4231 68.32 1360.40 2étan-01 42.96 41.98, 655 1368.30 25an-01 42.0 4183, 70.98 35751 (continued) 716 Pat Fight Vang the Enterprise: Acyuistons and Buyouts EXHIBIT 2 | Trading History of GE, Honeywell, and UTC Stock (continued) Date GE Sus urxsus ‘S&P 500 index 26-Jan-01 40.44 ener 1.35495 28.an-01 4021 69.12 1360.17 0-an-04 4191 60.80 137573 Btuan-01 4166 mat 1,366.01 1-Feb-01 4189 eaea 1373.47 2Feb.01 4193, 69.45, 1389.47 5.Feb-01 43.36 60.68 11354.31 6Febo1 43.13 ona 113852.26 7-58-01 42.54 6073 1340.89 aFeb.a1 an 704s 1.332.53 2.Fe0-01 aa 7032 131476 12Fab-01 4305 70.43 1.330.17 13Feb-01 42.73 68 1318.80 14Feb-01 ange se 131532 15-Feb01 348 7440 1326.51 16Fob-0t 2259 70 4.301.53 20-Fab.0t 4321 waar 1279 21-Feb.01 4206, 7452 41.255.27 2e-Fab.Ot 42.68, a8 1252.82 25-001 ated 2275 1245.86 26-Fob.Ot 348 7338 1267.65 27-Fobot 43.49 75.01 15794 28-Fob.O1 42.13 73.38 1239.98 ‘-aro1 4160 rar 1281.28 Soutce pine yao com (acceseedon Sepomber 25, 2005). Note: UTC stock chor "UTX" Caso 19 General Elec Propsod Acquisition oF Honeywell THT EXHIBIT 3__| Historical Stock Performance = 100) ya sinoa ing] [EC ies niger Tea wt008, | [reve Mar 2001 Fe, 4.2001. Index (Sept. 1, 2000 $ ¢ $s ¢ EP ot OSE oe ‘Source ip:inanee yao co faceaised Sopomtor 26, 2005). me Pt the Enterprise Acquisitions an Bu EXHIBIT 4 | Financial Data for Comparable Firms (values in milions of U.S. dollars except per-share amounts, beta, and multiples) Market Sicmonth Book Value Total Net Total Compary __Capitaization ug Price Date perShare Asscls Cash —_‘Debt_—_Libies Emerson ElecicCo, § 20601 $62.76 OG «SMBS 15,104 $ 261 § 4m19 § 8762 Testone, S 75 $4309 ass sanz8 «$1637 $280 SOOT § 12576 TyeotnatonsiLd $9558 $5499 095] SIDI $ ADDL $1205 § 974 § ZaaTE UntodTeciologies $3657) $0558 1.90 $1620 § 2594 $748 § AOS § 17270 oneal Bectieo. $400,790 «SABA 122 «$ S03 SBF O0G 18225 Stab OD $586 514 Henayuallot ne -S.S7G1S $4136 98H SIZG2 $5175 $1190 § Aaey 8S 15488 ‘shaves Net MV Enterprise Book Company Ouistending Sales RIT _—_ERITLA Income Eguily Vale” —‘Valie Emerson BecticGo. 427.43 «S$ ISAS § ZEIT ~$S2I0 Ste $25H F418 $6409 ‘Teton ne oss § 13000 $1580 § 2078 § 2B § ase GiS1e0 § Som Tyeolmematenaluid 160851 -§ 2H F HPS —G7AND —G AGAD Sopot Sioasa —§17.053 Uno Tocmologios 47031 «S$ HSK FAD GAH —§ TADK $4191 F 9537e GBM GonoralEkece Co. 903201 S12BOSt Sango §57:342 S127as Sashz22 SoSA3I1 $60.80 Honeyeatint Inc. a0729««§ P5025 $569 Saeed $1059 $5358 SS7BIT 8.9707 av Equity asa Enterprise Value asa Mtn of Mutpe of N ‘company EPS Soles EBIT EBITDA income EPS Book Valve Enersoncleaeco. «$339,200 1058 wat” 1806 410 Test ne 1551 aay 288 oe ae 155 TyeoiniomationalLd «$268 SLAB Ba] OH Poa saa Unted Tchnoges «SSB TI DoT kas 07 fe 387 Goveral lecse Co. S128 509 5682.2 3645 519 Honey att te stokes ae a 2013 aaa Modan «17e~«WOar~SCASSCaa a 2031 403 ‘Souroe: Standard and Poors Resere nah ase 19 Gone let's Propose Acuitn of Honeywell 719 EXHIBIT 5 | Financial Data for Comparable Transactions: Aerospace Industry “Target Name ‘Acquirer Name ‘Sundstrand Gulfstream Aerospace United Technologies General Dynamics ‘Announcement date san7n9%6 2122/1909 sit7/1999) “Tansacion value (ail) $15,202 $4;355 ‘$5,007 Equity value (Si) $13,350 34.408 195,420 Long-term dedtlequty oat od 28 “otal debtiequty oa 85 159 “Target priceequaty na 1750 2200 “Target prieftook 460 7.00 24.10 Enterprise valveet salos 112 216 223 216 Enterprise valueieash flow 10.09 858 1269 10.09 Eniorpice valie/EBIT 12.19 1166 1392 1219 Equity value/net income ‘a w7a9 2222 1971 Offer pricetoook value 462 699 2409 6.99 Otter pricerEPS na 1754 2198, 1976 ‘Stock price/b00k value (4 wooks prion) as 454 16.72 454 Premium overstock price: 1 day prior (%) oe 2069 peat 20.69 1 week prot (%) part 3193 3448 3193 4 tanth prio 3) 20.08 54.08 aaa aan Consideration offered stock cash, slock, and collar stock a = pot avalabe ‘ures: Thomean S06 Platnum 720 Pat Bight aluing the Karp: Acstions a Buon EXHIBIT 6 | Financial Data for Comparable Transactions: Jumbo Deals” ‘Target Name Gre ‘Amoco: USWEST—Texaco ‘Acquirer Name Boll Atlantic BP. Quest Chevron ‘Announcement date 7iesitoas —Gg0/1008 4/1999 10/16/2000 Medan “Tansacion value (Sil) $71,324 $355,040 $356,305 S4a3is $55,673 Equity vane (Si) 953.415 848,174 $56,307 sazere $50,794 Long-term dedlequity 191 0.5 939 050 tat Total deautequity 2a 045 1091 056 149 “Target prcetequaty 2320 2320 20,00 1530 2320 “Target pretbook 6.80 3.10 45.10 2.80 495 Enterprise valvanet sales 292 1.60 449 oo 226 Enterprise valvecash flow a6 9.33 1063 8.35 4 Enterprise valuolEBIT 1461 16.66 18.50 1237 15.64 Equty valueinet income zase 2284 star 1555 23.18 ‘ter preo?bo0k valve 676 307 4514 279 492 Ofer reelEPS a7 2318 2801 1534 23.18 Slock pricerbook value weeks prion 732 na 30.14 2.38 23 Promium ove stock price 1 day prior (%) are na seas 17.68 1768 1 wok prior (6) 22 na 5011 22.55 2255 1 ment prior (%) 4.94 a 407 1751 1751 Consideration offered stock stock stock, lia, stool lab “Jeno de are Wage whose transaction veka $40 bon or mor Source: Thomson SOC Pini 100 ware pus suoyauinase 804 2 pus SSEDOIO, SIBFEUE WO} UNEP a Suu sD eG BL BEN 279% SbuUIe9 o edeueoaed e se pup re (Guoqi) soieys vouwog sBuiwouod wor 04s, aigefed swnoooy, ssoi8—weudinbs pue eid 36014, ‘suiy eeys aout Toe aoe Sole eee wee Eo wel OL 94 sBuymouog vo ares woz oz oz met SEL weer ‘sesuadia y 908, soSe 084 wos, EBL BLL nga 108 spo08 sesuads pus 81809 aes we we ems SCOSC ‘IES BT GINO TOT weoce

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