United Technologies Corp. agreed to buy Rockwell Collins Inc. for about $23 billion, giving rise to an aerospace behemoth that can outfit jetliners and warplanes from tip to tail. The deal, one of the biggest in aviation history, creates an aircraft-parts giant better positioned to withstand the squeeze from planemakers Boeing Co. and Airbus SE for pricing discounts and higher output. The company will boast a broad suite of products for airplanes, from Rockwell Collins’s touchscreen cockpit displays to United Technologies’s Pratt & Whitney jet engines. “The combination gives us the ability to both scale and innovate,” Greg Hayes, chief executive officer of United Technologies, told analysts on a conference call Tuesday, a day after the deal was announced. “This will be good for our customers, it will be good for the industry because it gives us the scale to do things we couldn’t do on our own.” Rockwell Collins shareholders will receive $140 a share in cash and stock, the companies said in a statement Monday after weeks of behind-the-scenes negotiations. The price represents an 18 percent premium to Rockwell Collins’s closing level on Aug. 4, before Bloomberg News reported on the talks. Market Reaction Investors reacted with caution, pushing United Technologies down as much as 3.6 percent, the most intraday in almost six months and the biggest drop on the Dow Jones Industrial Average. The shares fell to $113.67 at 10:19 a.m. in New York, while Rockwell Collins climbed less than 1 percent to $131.58. United Technologies said it plans to finance the cash portion of the deal with about $14 billion of new debt. Moody’s Investors Service placed the company’s ratings on review for downgrade, saying United Technologies may have to increase its “reliance on inherently uncertain earnings growth to moderate leverage.” Moody’s currently has an A3 senior unsecured debt rating and Baa1 junior subordinated debt rating for United Technologies. With the acquisition, valued at $30 billion including the assumption of debt, United Technologies is increasing its bet on commercial-aircraft systems, where it has stumbled recently with the rocky rollout of a new jet engine that cost $10 billion to develop. The aerospace market accounts for about half of sales at the Farmington, Connecticut-based manufacturer, with the rest coming from elevators, air conditioners and other building systems. “This is a significant deal for UTC and the aviation industry in general,” Hans Weber, president of San Diego-based consultancy Tecop International Inc., said in an email. By buying Rockwell Collins, which delivers avionics systems for the U.S. planemaker’s 787, “UTC becomes a critically important supplier to Boeing and will have a strong negotiating position as Boeing is putting price pressure on suppliers.” United Technologies plans to combine its aerospace business with Rockwell Collins in a new unit named Collins Aerospace Systems. Rockwell Collins CEO Kelly Ortberg will head the division, while Dave Gitlin, who currently runs UTC Aerospace Systems, will serve as president and chief operating officer. The buyer expects the acquisition to add to adjusted earnings after the first year following closing, and generate $500 million or more in annual pretax savings and other benefits by the fourth year. The deal is expected to close by next year’s third quarter, subject to regulatory and shareholder approval, and other customary conditions. United Technologies opted for a mix of cash and stock with the goal of maintaining a strong credit rating, the company said. Chief Financial Officer Akhil Johri said United Technologies would suspend its share repurchase plans for the next few years. Industry Dealmaking Rockwell Collins, based in Cedar Rapids, Iowa, is already absorbing the largest acquisition in its history. The company earlier this year closed the purchase of B/E Aerospace, adding deluxe jetliner seats, lavatories and galley equipment to a lineup of high-technology avionics products. That deal was valued at $8.6 billion including the assumption of debt. Consolidation is necessary for the aerospace-parts manufacturers, said Shukor Yusof, founder of aviation consultation Endau Analytics. Given that the industry remains fragmented, the deal isn’t likely to encounter regulatory hurdles, he said. When Hayes took the United Technologies helm in 2014, he pledged to consider major moves, including deals potentially in excess of $20 billion. The company sold its Sikorsky helicopter business to Lockheed Martin Corp. for $9 billion in 2015. Hayes rejected a merger proposal in early 2016 from Honeywell International Inc., saying he didn’t believe antitrust regulators would have approved the $90 billion tie-up. Honeywell later abandoned the bid. The Rockwell Collins transaction tops United Technologies’ own $18 billion purchase of Goodrich Corp. in 2012. Billionaire Warren Buffett’s Berkshire Hathaway Inc. last year completed the acquisition of Precision Castparts Corp., a metals fabricator that produces parts for aerospace suppliers, for $37 billion including debt. Manufacturer Pressure Accelerated industry consolidation comes as suppliers face pressure from airframe manufacturers to reduce costs and boost production rates to support faster output of narrow-body jetliners such as Airbus’s A320 and Boeing’s 737. The U.S. planemaker is also treading onto its suppliers’ turf with new businesses dedicated to spare parts and services, as well as avionics. Rockwell Collins has a customer base that spans the world’s largest airlines, airports and private-jet operators. Those clients, combined with the company’s catalog of avionics and aircraft-cabin equipment could help insulate the merged company from Boeing’s expansion into aftermarket sales and services, Douglas Rothacker and Joel Levington of Bloomberg Intelligence said in a report before the deal was announced. Airbus issued a veiled warning to United Technologies to not let empire building get in the way of critical deliveries for the French planemaker. The U.S. company supplies the Airbus A320 family of aircraft with its GTF engines, which have been dogged by technical glitches that have weighed on deliveries of the updated version of Airbus’s best-selling model. “Our total focus is on delivering planes, and we hope that this M&A would not distract UTC from their top operational priority,” Airbus said by email.  Storied Companies The United Technologies-Rockwell Collins deal would combine two storied companies with roots in the early days of the U.S. aviation industry. Arthur Collins founded the eponymous short-wave radio company in 1933. Collins Radio made its mark serving a South Pole expedition by Rear Admiral Richard Byrd, also expanding into airplane communications and eventually into space as a supplier to the Mercury, Gemini and Apollo missions. The acquirer is a descendant of the United Aircraft and Transport Corp., a conglomerate formed by Boeing founder William Boeing and Pratt & Whitney’s Frederick Rentschler. Trust busters in 1934 broke up the company, which included Boeing, Pratt and United Airlines. Few Hurdles Hayes said he doesn’t see any insurmountable hurdles to closing the deal. Concessions are often required where regulators spot overlaps between companies that might allow them to squeeze rivals or customers. United Technologies won European Union approval to buy Goodrich only after an extended 2012 probe into antitrust concerns. The companies allayed regulatory worries by selling Goodrich units for electrical power generation and small-engine controls and giving Rolls-Royce Holdings Plc the option to buy a Goodrich fuel nozzle research project. United Technologies and Rockwell Collins have little overlap in products, analysts said. “Although we expect scrutiny from regulators we fully expect this deal to close,” Jeff Sprague, an analyst with Vertical Research Partners, said in a note. Morgan Stanley served as financial adviser to United Technologies, while Wachtell, Lipton, Rosen & Katz provided legal advice. JPMorgan Chase & Co. and Citigroup Inc. were financial advisers to Rockwell Collins, and Skadden, Arps, Slate, Meagher & Flom handled legal advisory services.