Published: Thu, June 13, 2019
Markets | By Erika Turner

United Technologies, Raytheon seal massive USD74b deal

United Technologies, Raytheon seal massive USD74b deal

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.

President Trump has poured cold water on a $120 billion merger between United Technologies and Raytheon by suggesting that the deal could make it harder for the Pentagon to negotiate weapons contracts.

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.

"The combination of United Technologies and Raytheon will define the future of aerospace and defence", said Greg Hayes, United Technologies' chairman and chief executive.

"By joining forces, we will have unsurpassed technology and expanded R&D capabilities that will allow us to invest through business cycles and address our customers' highest priorities", Hayes added.

Shares of Raytheon rose about 2% early Monday, a day after the deal was announced.

Under the deal, United Technologies' shareholders will own around 57 percent and Raytheon shareholders will own about 43 percent of the merged company. The merger will not include Carrier and Otis, now units of United Technologies but in the process of being spun-off by the first half of 2020. We're talking roughly $75 billion in annual sales - more than Lockheed Martin or Northrop Grumman, and second only to Boeing. Raytheon shareholders are set to receive 2.3 shares in the combined company for each Raytheon share now owned.

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.

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Industry analysts saw fewer advantages for Raytheon, but noted that it has ensured that it is not left behind in the push to grow bigger in aerospace and defense.

'I hope the Raytheon deal, I hope it can happen.

The newly created company is expected to return between $18 billion and $20 billion of capital to shareholders in the first three years after the deal's completion, the companies said.

The maker of Tomahawk and Patriot missile systems Raytheon is to merge with aerospace industrial concern United Technologies Corporation (UTC) to take advantage of the strong global demand for fighter jets and munitions.

"I don't remember the last time we competed against United Technologies", he said.

Eventually, the companies expect the merger will cut $1 billion in costs annually, half of which will be returned to customers.

United Technologies could benefit from reducing its exposure to commercial aerospace clients amid concerns that the rise of worldwide trade protectionism will weigh on the flow of goods through air traffic. Connecticut-based United Technologies was founded in 1934 and makes products for the aerospace and building sectors, including airplane engines and spacesuits.

This massive deal is the climax to a dramatic revamp that United Technologies has undergone under the leadership of Hayes, who took over at CEO in 2014.

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