Raytheon and United Technologies to create a defense giant


Together Raytheon and United Technologies would be the world's second-largest defence and aerospace company by sales Credit Getty /AFP

"This merger's going to bring together two leading companies with unsurpassed technological capabilities, both for today and into the future", said Hayes.

UTC chief executive Greg Hayes, when asked about the comments, said he would talk to the president later on Monday. Raytheon Company is a technology and innovation leader specializing in defense, security and civil markets throughout the world.

Both companies' shares stand to benefit because of the potential synergies, which could free up capital that may be deployed, Jefferies wrote in a note. I wasn't expecting the pendulum to swing quite this quickly, but the United Technologies-Raytheon merger will certainly have that effect. Each advanced more than 20pc this year, in line with a Standard & Poor's index of aerospace and defence manufacturers. The two contractors have signed an all-stock deal that will create a systems provider across aerospace and defense segments.

The deal brings together two companies that have been intertwined with America's technological explosion of the past almost 100 years.

Under the deal announced on Sunday, Raytheon shareholders will receive 2.3348 shares in the combined company for each Raytheon share. However, at the end of the day, United Technologies' shareholders will own 57% of Raytheon Technologies, while Raytheon's current shareholders will have a 43% stake. Raytheon will contribute seven of the 15 board positions, including the lead director.

The deal is expected to close in 2020 but only after UTC completes its divestment of subsidiaries, Otis Elevator Company and Carrier Corporation, a world leader in heating, ventilating and air conditioning (HVAC) systems. A conference call is scheduled for Monday morning.

United Technologies and Raytheon have market capitalizations of $114 billion and $52 billion, respectively.

United Technologies' aerospace business makes engines for Airbus as well as the F-35, which was developed by Lockheed Martin and is the most expensive military project in history.

Conversely, United Technologies could benefit from reducing its exposure to commercial aerospace clients amid concerns that the rise of worldwide trade protectionism will suppress economic growth and weigh on the flow of goods through air traffic. And it will offer expanded technology and R&D capabilities for delivering innovative and cost-effective solutions aligned with customer priorities and national defense strategies of the US and its allies and friends. "It's already non-competitive".

Another wildcard in winning approval for the deal: the U.S. Department of Defense. At the time, Wall Street analysts anticipated resistance from the Pentagon, as well as planemakers. The Rockwell Collins deal did eventually get China's signoff, but it took longer than some expected, and it's unclear how the country would treat a megamerger amid escalating trade tensions with the US and a debate around whether aircraft orders could get caught in the fray. Some of that overlap may not be readily apparent because programs are classified, he wrote.

The combined company will have about $26 billion in debt, with $24 billion coming from UTC.

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