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Canada's Sikorksy Copter Deal Back on Track

Zacks Equity Research

The Canadian Ministry of Public Works and Government Services recently announced that it has given a green signal to the $4.7 billion (C$5 million) deal to buy 28 helicopters from Sikorsky Aircraft Corp., a subsidiary of diversified business conglomerate United Technologies Corp. (UTX). The deal, which was almost shelved due to long delays, got a fresh lease of life when the Canadian government entered into new Principles of Agreement with principal contractor Sikorsky.

Under the terms of the new agreement, Sikorsky will deliver a fleet of CH-148 Cyclone Maritime helicopters to help Canada replace its aging CH-124 Sea King copters by 2015. The twin-engine multi-role maritime helicopter will be operated by the Canadian Forces Air Command for anti-submarine warfare (:ASW), anti-surface warfare, surveillance and control, and search and rescue (SAR) missions. It will also provide tactical transport facility for national and international security missions.

In addition, the new contract also states that Sikorsky will be required to upgrade the helicopters' capability to suit Canada without any extra charge. The copters, developed under the Canadian Forces' Maritime Helicopter Project (MHFI), will be jointly built by Sikorsky and General Dynamics Corp. (GD).

Sikorsky is one of the world’s largest manufacturers of military and commercial helicopters, and also provides aftermarket helicopter and aircraft parts and services for its parent company United Technologies. At present, major production programs at Sikorsky include the UH-60M Black Hawk medium-transport helicopters and HH-60M Medevac helicopters for the U.S. and foreign governments, the S-70 Black Hawk for foreign governments, the MH-60S and MH-60R helicopters for the U.S. Navy, the International Naval Hawk for multiple naval missions, and the S-76 and S-92 helicopters for commercial operations.

Based in Hartford, Conn., United Technologies provides high-end technology products and services to the building systems and aerospace industries worldwide. The company is a diversified business conglomerate serving various end markets such as aerospace, defense and commercial construction. The business diversification allows the company to remain profitable amid tough economic times.

The operations of the company are primarily classified into two principal businesses: commercial and aerospace. Under its commercial business, the company has Otis and the UTC Climate, Controls & Security division, which combined the former Carrier and UTC Fire & Security divisions. The aerospace business of the company consists of Sikorsky aircraft and the UTC Propulsion & Aerospace Systems, which includes UTC Aerospace Systems and Pratt & Whitney divisions.

United Technologies presently has a Zacks Rank #3 (Hold). Other notable companies in the industry include ITT Corporation (ITT) and Crane Co. (CR), both carrying a Zacks Rank #2 (Buy).

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