United Technologies chief executive Greg Hayes called the company's split a “pivotal” decision that should maximize returns for investors. (Justin Lane/EPA-EFE/REX/Shutterstock)

Global manufacturing conglomerate United Technologies will split into three companies and has received regulatory sign-offs for its $23 billion merger with jet engine manufacturer Rockwell Collins, the company announced Monday after markets closed.

The spin-off will create three companies built around specific product areas: Carrier, an Indiana-based air conditioner and refrigerator manufacturer; Otis, which will focus on industrial systems including elevators and moving walkways; and a new United Technologies business that consists of the combined assets of jet engine manufacturers Pratt & Whitney and Collins Aerospace.

United Technologies chief executive Greg Hayes called the split a “pivotal” decision that should maximize returns for investors.

“These three businesses are already leaders in their respective industry,” Hayes said. “There’s no weak sister here that we’re worried about going forward. And each of these businesses will have a greater opportunity to build on their histories of shaping industries as independent companies."

Investors did not welcome the news, and the company’s stock price dropped nearly six percent in afternoon trading. Analysts said the sell-off was probably a reaction from long-time United Technologies investors, who were attached to the idea of a diversified industrial holding company.

Analysts described the split as part of a broader shift away from the old-style empire-building approach that produced the giant multi-industry conglomerates in the 1960′s and ’70′s.

Throughout its 84-year history United Technologies has amassed a broad portfolio of assets up and down the U.S. industrial and military supply chains. Today there’s a push toward more focused operations that can dominate particular industries.

“I think we all recognize the fact that focused businesses tend to do better,” Hayes told analysts.

The new United Technologies will offer investors a company focused on supplying the commercial and defense aerospace industry. Connecticut-based Pratt & Whitney is a market-leading supplier of jet engines for military aircraft as well as large commercial engines, where it competes with companies like General Electric Aviation and Rolls Royce. Rockwell Collins focuses more closely on engine and aircraft components such as avionics, industrial control systems and interiors.

The combined companies logged sales of $39 billion in 2017. Hayes he expects it to reach $50 billion by 2020, a milestone that would make it a top-tier aerospace manufacturer.

The combination worried others across the aerospace industry. When the companies announced plans to merge last year, Chicago-based aerospace manufacturer Boeing immediately expressed skepticism, saying giving its suppliers too much leverage on pricing issues would be bad for consumers.

“We are skeptical that it would be in the best interest of -- or add value to -- our customers and industry,” Boeing said in a statement at the time, according to media reports. Boeing has itself been pushing into the market for aircraft parts and support, putting it head-to-head with United Technologies in a lucrative market to keep aging aircraft functional.

In March Boeing lifted its opposition to the combination. The Justice Department took more than a year to sign off on the combination based on antitrust concerns. When it did, it required the two companies to divest certain product lines focusing on aircraft de-icing and stabilizer equipment. It also took the company about a year for the company’s to get approval for the merger of Rockwell Collins and Pratt and Whitney, with Chinese regulators giving the deal their final sign-off last week.

In a Tuesday call with investors, executives emphasized that Otis, Carrier and the new United Technologies are free to pursue their growth strategies through mergers and acquisitions moving forward, suggesting portions of the United Technologies portfolio could keep changing hands.

Byron Callan, a defense industry investment analyst with Capital-Alpha Partners, said any merger of United Technologies' defense assets would face an uphill battle in a defense industry where resources are already concentrated at the top.

“You’ve already had this battle raging with Boeing and consolidation among its suppliers, and United Technologies has been a part of that,” said Byron Callan, a defense industry investment analyst with Capital-Alpha Partners. “Regulators would probably look very closely at this new [United Technologies] company if it were to combine with another major defense company.”