Raytheon and United Technologies in merger talks: WSJ report

Mae Love
June 12, 2019

"Under Secretary Ellen Lord is engaging with industry leadership to understand the implications and governance as a result of this acquisition", Lieutenant Colonel Mike Andrews, a department spokesman, said, referring to the Pentagon's acquisition chief in a statement Monday.

The merger is expected to be completed in the first half of 2020, once Carrier and Otis are successfully separated from United Technologies. A joint statement from the two companies that the joint company would be named Raytheon Technologies Corporation with Raytheon's CEO Tom Kennedy as the Executive Chairman. The combined company is anticipated to have almost $74 billion in pro forma 2019 sales, while Boeing had generated record yearly revenue of $101 billion in 2018.

US President, Donald Trump, expressed concerns with the union of the two companies.

"Mergers such as this, combined with significant financial resources of the largest defense companies, strategically position the acquiring companies to dominate large parts of the defense industry", he said.

"A scenario whereby Raytheon would be competing longer-term against Lockheed Martin and a combined Northrop + (United Technologies) may have been an unacceptable outcome of consolidation for Raytheon".

"We'll supply all the content and all the systems, all of the offensive, defensive capabilities necessary to make the system successful", Hayes told Defense News in an interview published Monday. A White House-commissioned report released last October concluded that "all facets of the manufacturing and defense industrial base are now under threat", and there are "entire domestic industries near extinction". "It becomes one big fat attractive company, but I have to negotiate, meaning the United States has to buy things". He added that both companies are "great" but said he anxious that the merger would "take away more competition".

It is unclear whether the merger between Raytheon and United Technologies will necessarily hurt competition.

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The deal may also be scrutinized by the Pentagon, and perhaps Congress.

Under the deal, United Technologies' shareholders will own around 57 percent and Raytheon shareholders will own about 43 percent of the merged company. Two years after the merger closes, he will add the title of chairman.

The merger is expected to be one of the largest of the year.

Raytheon is best known for its Patriot air defense systems, which gained fame during the first Gulf War, and its Tomahawk cruise missiles, often the first weapons fired from USA navy ships in recent conflicts.

A United Technologies-Raytheon merger has always been speculated on by analysts and investors as the two companies operate mainly in different segments, meaning a deal is likely to attract less scrutiny from regulators than other mergers between big defense players.

"We don't expect DoD to raise strong objections to the deal", though there may be small divestitures where there's overlap with businesses picked up with the Rockwell Collins purchase, analyst Byron Callan of Capital Alpha Partners wrote in a note Sunday.

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