Raytheon, United Technologies Announce Merger

Mae Love
June 10, 2019

Logo of the US defense company Raytheon is pictured at an global military fair in Kielce, Poland September 7, 2017.

United Technologies Corp agreed on Sunday to combine its aerospace business with USA defense contractor Raytheon Co and create a new company worth more than $120 billion, in what would be the industry's biggest ever merger. We don't have to go to China. The bigger company will combine United Technologies' Pratt & Whitney F-35 fighter jet engines with Raytheon's Patriot missile-defense products and expertise in areas such as radars, munitions and cybersecurity.

The new entity will be called Raytheon Technologies Corp. when the deal closes in the first half of 2020, after United Technologies completes the separation of its Otis elevator and Carrier air-conditioner businesses, the companies said in a statement Sunday. The combined company would be the second-largest US aerospace company, behind Boeing.

Under the deal, United Technologies' shareholders will own around 57 percent and Raytheon shareholders will own about 43 percent of the merged company.

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Apart from developing new and critical technologies, the companies want to make advancements in developing hypersonics and future missile systems and directed energy weapons. United Technologies' current Chairman and CEO Greg Hayes will be its CEO.

The newly formed Raytheon Technologies would be combined with United's Collins Aerospace and Pratt & Whitney, both leading producers of jet engines and engine parts. Raytheon shareholders will own the remaining stake, and Raytheon CEO Tom Kennedy will be named executive chairman. The company's board will have eight directors from United Technologies and seven from Raytheon. The combination excludes Otis and Carrier, which are expected to be separated from United Technologies in the first half of 2020 as previously announced. 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. A deal with United Technologies would allow Raytheon to expand into commercial aviation, which does not rely on government spending like the defense sector.

The blockbuster deal caps a dramatic revamp of United Technologies under Hayes, who took the reins at the industrial conglomerate in 2014 with a vow to pursue big transactions.

Greater heft would enhance the ability of United Technologies to withstand cost pressures from customers such as Boeing Co. and Airbus SE, said Rothacker, the Bloomberg analyst. Shearman & Sterling LLP was legal adviser to Raytheon.

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