3 Deals to Watch: UTX, HP, AOL

Deals continued to be inked despite volatility in the equity markets Thursday.

After half a week of speculation, United Technologies (UTX) confirmed that it will buy Goodrich(GR) for $16.4 billion, roughly $1.5 billion more than earlier reported.

The deal values Goodrich at $18.4 billion because United Technologies will take on $1.9 billion in debt with the purchase.

UTX, the industrial conglomerate, will pay Goodrich, the commercial plane landing gear and materials specialist $127.50 a share, roughly a 50% premium over the price of shares before merger rumors circled this week.

Goodrich's landing gear and aerospace expertise will be added to United Technologies' aerospace divisions, which include Sikorsky helicopters, Pratt & Whitney plane engines and its aerospace electronics unit, Hamilton Sundstrand. A diversified industrial conglomerate, United Technologies also sells Carrier climate control units, Otis elevators, and UTC fire, security and power services.

In earlier interviews with TheStreet , Brian Langenberg, principal of research firm Langenberg & Co., said United Technologies is looking to grow its presence in commercial aircraft sales to diversify from its military aircraft focus. He says Goodrich will likely be added to its Hamilton Sundstrand unit.

Matt Collins, an analyst at Edward Jones, said that, "Given United Technologies' strong balance sheet and record low interest rates, we would expect cash on hand and additional debt to be used" to finance the purchase.

The $127.50 price would be the highest stock price for Goodrich in its 23-year history, and an 80% gain on pre-recession stock highs.

HP's Board to Reassess CEO and Spinoff Strategy

HP(HPQ), the largest U.S. personal computer maker is reconsidering its plan to tack in strategy by spinning i! ts PC di vision and making a shift into business services by buying British data search software provider Autonomy for $10.3 billion. The struggling U.S. computer giant is battling to find a profitable business strategy and leadership after a year in which profit margins and leadership have come in below expectations.

Last fall, the company ousted Chief Executive Mark Hurd on allegations of inappropriate conduct and replaced him with Leo Apotheker, a former CEO of German software giant SAP(SAP) with no executive experience in the United States. Apotheker's strategy is for HP to get out of building personal computer hardware and move into software services geared toward businesses, an idea that he pitched to the company board and which they are now reconsidering, according to reports from Bloomberg.

This morning The New York Times reported that HP's board is leaning toward replacing Apotheker with Meg Whitman, the former eBay(HPQ) chief executive.

When Apotheker unveiled his new strategy, he also said the company would stop making mobile products such as the Touchpad, discontinuing operations that were built up after the company acquired Palm last year for $1.2 billion.

According to company filings, sales and operating income fell in the latest quarter ended in July. Gross profits fell 1.6% year over year in July. The stock was down nearly 5% in morning trading after surging close to $25 a share yesterday on news of a potential change of strategy. HP is down more than 45% year to date, the worst performer of any Dow Jones Industrial Average company.

AOL Shares Fall on Speculation of No Yahoo! Merger

After falling over 15% yesterday, AOL (AOL) shares fell 5.2% to $11.15 in early trading as traders speculated whether it was actually considering a merger with sear! ch giant Yahoo!(YHOO).

In an interview with The Wrap, Arianna Huffington President of AOL's new Huffington Post Media Group after its $315 million purchase of the popular news website in February said about reports AOL was looking to merge with Yahoo!, "I almost feel like there's a reverse correlation between rumors and reality."

On Sept. 9, Bloomberg reported that AOL Chief Executive Officer Tim Armstrong was in talks with private equity firms and investment bank Allen & Co. to assess a merger with Yahoo after it fired its CEO Carol Bartz. According to the report, Yahoo!, with a market cap of $17.6 billion would buy smaller AOL with a market cap of $1.26 billion and leave its CEO Tim Armstrong on to run the combined media, search and dial up Internet conglomerate.

Speaking about her experience with mergers when AOL bought huffingtonpost.com, Huffington said, "There wasn't a single rumor about AOL and the Huffington Post merging before that was about to happen. When people want something to happen and they care, they're careful about leaks."

AOL shares are down 50.3% year to date, while Yahoo!. Shares are down 16%.