Raytheon, United Technologies to merge

Darnell Taylor
June 10, 2019

Raytheon, a massive US defense contractor best known for manufacturing the Patriot missile defense system, has agreed to merge with industrial technology giant United Technologies in an all-stock deal, the two companies announced Sunday.

Trump said aerospace companies had "all merged in so it's hard to negotiate" with them and suggested the defense industry could be heading in the same direction.

Following Saturday reports that a merger was imminent, the two firms made the news official Sunday, launching a website about the planned all-stock deal.

"This is bringing two great technology companies together to provide technology solutions to our aerospace and defense customers that nobody else could ever provide", said United Technologies CEO Greg Hayes, who would lead the combined company as chairman and CEO in two-years. The merger is expected to close in the first half of 2020, following completion by United Technologies of the previously announced separation of its Otis and Carrier businesses. "It becomes one big, fat handsome company", Trump said.

"Does [the merger] make it less competitive? That would be the thing that bothers me most". The move creates a new company that will be called Raytheon Technologies Corporation which would have an estimated annual sales of $74 billion.

The merger would give one of Tucson's major employers Raytheon, exposure to the commercial aerospace sector. Once the merger is complete, United Technologies shareholders will own approximately 57% of the company; Raytheon shareholders will own the rest. It could also push other defence contractors, such as Lockheed Martin Corp., to explore expanding their commercial businesses.

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Waltham-based Raytheon was founded in 1922 and makes missile and cyber security systems.

The companies will have combined debt of about $26 billion when the deal closes, with about $24 billion of that coming from United Technologies, the companies said in their statement.

Part of the rationale for the deal is the huge investment needed to develop next-generation equipment such as weapons which fly faster than the speed of sound and incorporating artificial intelligence into defence systems. "Executives said the merger would allow them to boost research spending and squeeze out some $1 billion in annual costs from the marriage", according to WSJ.

United Tech's shares were down about 2% at $129.40, while Raytheon's stock was up 1.7% at $189.2 in morning trade. "Raytheon Technologies will continue a legacy of innovation with an expanded aerospace and defense portfolio supported by the world's most dedicated workforce", said Tom Kennedy, Raytheon Chairman and CEO.

The headquarters will be in the Boston area; now United Technologies is based on Farmington, Connecticut, while Raytheon's headquarters is in Waltham, Massachusetts.

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

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