Raytheon, United Technologies merger creates defense powerhouse

Raytheon

President Donald Trump says he's a "little concerned" about the merger between Raytheon Co. and United Technologies Corp, a deal that would create one of the world's largest defense companies.

The Wall Street Journal is reporting that this weekend the management of defense contractor Raytheon agreed to merge in an all-stock deal with United Technologies (UTC).

The United-Raytheon deal is expected to close in early 2020, after United's non-aerospace businesses take flight, Reuters reported.

The combination "will define the future of aerospace and defence", United Technologies CEO Greg Hayes said.

"Under Secretary Ellen Lord is engaging with industry leadership to understand the implications and governance as a result of this acquisition", Lieutenant Colonel Mike Andrews, a department spokesman, said, referring to the Pentagon's acquisition chief in a statement Monday.

United Technologies has deep roots in CT and its businesses - Pratt & Whitney, Collins Aerospace, Otis elevators and Carrier heating, cooling and security - have created thousands of indirect jobs at local businesses. The combined company is anticipated to have almost $74 billion in pro forma 2019 sales, while Boeing had generated record yearly revenue of $101 billion in 2018.

United Technologies shareholders will own approximately 57 per cent of the new business and Raytheon share owners will own around 43 per cent of the combined company.

The companies will push to develop new technologies more quickly with combined R&D spending of $8 billion annually and more than 60,000 engineers.

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Matt Stoller, fellow at the non-profit Open Markets Institute, said Trump is correct to raise anti-competition concerns over the proposed merger-while expressing skepticism that the president will hold to that position. Raytheon makes everything from missiles and missile defense systems to radars and cybersecurity solutions.

The combined companies are expecting to return $18 to $20 billion of capital to shareholders in the first 36 months following the completion of the merger.

Meanwhile United Technologies two main businesses are engine maker Pratt & Whitney and Collins Aerospace, which manufactures equipment for commercial, regional and military aircraft such as seats, landing gears and sensors.

The headquarters will be in the Boston area; now United Technologies is based on Farmington, Connecticut, while Raytheon's headquarters is in Waltham, Massachusetts.

Kennedy, of Raytheon, is scheduled to moderate a Boston College Chief Executives Club lunch conversation with General Dynamics Chairman and CEO Phebe Novakovic.

Hayes told investors and business reporters on the conference call there would be about $1 billion in cost savings from aligning the companies "by year four", and that half of this would be "shared with government customers", suggesting this is a reason the Defense Department "is really going to like this deal". When the dust settles, shareholders of United Technologies will own around 57pc of the new firm while Raytheon's will own around 43pc.

The merger is expected to be one of the largest of the year. Raytheon employs almost 70,000 globally.

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