Media Moves

Coverage: Raytheon and United Technologies negotiate merger

June 10, 2019

Posted by Irina Slav

Raytheon and United Technologies are in talks to consolidate their businesses, which could create a $120-billion defense giant.

Business Insider’s Theron Mohamed had the news:

Two of the world’s largest aerospace and defense companies are joining forces to create the industry’s second-biggest player behind Boeing.

United Technologies, which makes electronics and engines for the commercial-aviation sector, and Raytheon, which manufactures missile systems and military equipment for the US government, agreed to combine their businesses on Sunday, the companies announced.

Shares of both companies are rallying in premarket trading — United Technologies is up 5.2% and Raytheon is up 2.8%.

Bloomberg’s Rick Clough reported on the details:

Hayes will hold the CEO job in the combined organization, while Raytheon CEO Thomas Kennedy will become the executive chairman. Hayes will ascend to both roles three years after the deal closes.

Under terms, Raytheon shareowners will receive 2.3348 shares in the combined company for each Raytheon share they hold. When the dust settles, shareholders of United Technologies will own approximately 57% of the new firm on a fully diluted basis while Raytheon’s will own approximately 43%. Raytheon will contribute seven of the 15 board positions, including the lead director.

United Technologies isn’t paying a premium for Raytheon, taking into account the separation of the Otis and Carrier businesses, according to a person familiar with the matter, who asked not to be identified because the information is private. A conference call is scheduled for Monday morning.

Leslie Josephs from CNBC said the deal would reshape the aerospace and defense industry:

Raytheon and United Technologies have a combined market value of close to $166 billion. The stock price of each has gained more than 21% this year, far outpacing the broader market, as they’ve reaped the benefits of strong defense spending and record orders for passenger planes around the world.

The new company, which they plan to name Raytheon Technologies, would have approximate annual sales of $74 billion, putting it behind Boeing as the second-largest aerospace and defense company in the U.S. by revenue.

The combined company, with big footprints in both the fast-growing commercial aerospace business and an increase in military spending, may be emboldened to push back on big customers like Boeing, Airbus and Lockheed Martin in terms of pricing, aftermarket work and intellectual property.


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