United Technologies, Raytheon to Merge for Aerospace Giant

Raytheon

In what could be the biggest merger in the aerospace and defense industry, the United Technologies and Raytheon merger will create a new company worth about $121 billion.

When contacted by the media on Sunday, the United Technologies spokesperson declined to comment on whether the company would pay a premium for Raytheon once the Carrier and Otis separations are completed.

United Technologies Chief Executive Greg Hayes said he saw very few regulatory hurdles for the proposed merger. Under the merger agreement, United Technologies stockholders will own 57% of Raytheon Technologies and Raytheon shareholders will own the rest of the new company. The merger will happen after UTC has spun out its non-aerospace companies - Carrier Air Conditioning and Otis Elevator, a move that's already well underway. Airbus has an opportunity to steal sales away from a potential new mid-market Boeing plane that hasn't been officially announced yet and may get put on the back burner because of the Max crisis. The combined company is to be called Raytheon Technologies.

In 2011, Ashton Carter, who was then the chief weapons buyer and later became defense secretary, said the Pentagon would welcome USA defense company mergers, spinoffs and divestitures provided they didn't involve the top five or six suppliers acquiring each other.

Raytheon shareowners would receive 2.3348 shares in the combined company for each Raytheon share.

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"We'll supply all the content and all the systems, all of the offensive, defensive capabilities necessary to make the system successful", Hayes told Defense News in an interview published Monday. According to a report in the Washington Post, the company expects to hire roughly 20,000 people in the next year.

"A scenario whereby Raytheon would be competing longer-term against Lockheed Martin and a combined Northrop + (United Technologies) may have been an unacceptable outcome of consolidation for Raytheon".

United Technologies could benefit from reducing its exposure to commercial aerospace clients amid concerns that the rise of global trade protectionism will weigh on the flow of goods through air traffic. Mr Hayes will ascend to both roles three years after the deal closes. United Technologies Corporation, comprised of Collins Aerospace and Pratt & Whitney, is headquartered in Farmington, Connecticut.

The bigger company will combine United Technologies' Pratt & Whitney F-35 fighter jet engines with Raytheon's Patriot missile-defence products and expertise in areas such as radars, munitions and cybersecurity. United Technologies provides primarily commercial plane makers with electronics, communications and other equipment, whereas Raytheon mainly supplies the USA government with military aircraft and missile equipment.

Mr Hayes will be named the chief executive of the new entity, while Raytheon chief executive Tom Kennedy will be appointed its executive chairman. Raytheon employs almost 70,000 globally. That's in the range of what United Technologies' had predicted its current mix of businesses will generate this year before the breakup.

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