Date
17 June 2019
Integration of Raytheon with United Technologies' aerospace business will create a giant new conglomerate that will span commercial aviation and defense procurement. Photo: Reuters
Integration of Raytheon with United Technologies' aerospace business will create a giant new conglomerate that will span commercial aviation and defense procurement. Photo: Reuters

United Technologies to merge aerospace business with Raytheon

United Technologies agreed on Sunday to combine its aerospace business with US defense contractor Raytheon and create a new company worth about US$121 billion, Reuters reports.

The deal, which marks the sector’s biggest ever merger, would reshape the competitive landscape by forming a conglomerate which spans commercial aviation and defense procurement, the report noted.

United Technologies provides primarily commercial plane makers with electronics, communications and other equipment, whereas Raytheon mainly supplies the US government with military aircraft and missile equipment.

While United Technologies and Raytheon have some common customers, their business overlap is limited, an argument the companies plan to make once US antitrust regulators start scrutinizing the merger.

United Technologies has said it is on track to separate its Carrier air conditioning and Otis elevator businesses, leaving the company focused on its aerospace business through its US$23 billion acquisition of Rockwell Collins, which was completed in 2018, and the Pratt & Whitney engines business.

Under the deal announced on Sunday, Raytheon shareholders will receive 2.3348 shares in the combined company for each Raytheon share. The merger is expected to result in more than US$1 billion in cost synergies by the end of the fourth year, the companies said.

United Technologies shareholders will own about 57 percent of the combined business, called Raytheon Technologies Corporation, which will be led by Hayes.

Raytheon shareholders will own the remaining stake, and Raytheon CEO Tom Kennedy will be named executive chairman.

The deal is expected to close in the first half of 2020.

The merger could put pressure on General Electric, which competes with United Technologies for commercial aerospace clients, to seek scale.

It could also push other defense contractors, such as Lockheed Martin, to explore expanding their commercial businesses, Reuters noted.

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