Raytheon & UTC agree upon an All-Stock “Merger of Equals”

Industry News

Raytheon-UTC-agree-upon-an-All-Stock-“Merger-of-Equals” Raytheon & UTC agree upon an All-Stock “Merger of Equals”Raytheon, a Waltham, Massachusetts-based industrial core manufacturing corporation, and United Technologies Corporation (UTC), a Farmington, Connecticut-based multinational conglomerate, on Sunday, Jun. 9th 2019, have announced their decision to merge in an all-stock deal – a tie-up that’s expected to send ripples all across the fast-growing defense and aerospace sectors.

The behemoth merger deal would combine United Technologies’ burgeoning aerospace business that comprises of almost everything from jet engines, cockpit controls, and airplane seats with Raytheon’s Tomahawk missile.

According to both the companies post-merger the combined annual sales would be around $74 billion. Speculations are that post-merger the new company will be called Raytheon Technologies, which would only be second-largest to Boeing in the US aerospace and defense industry, by revenue.

“The combination of United Technologies and Raytheon will define the future of aerospace and defense,” states Greg Hayes, Chairman & CEO of United Technologies. “By joining forces, we will have unsurpassed technology and expanded R&D capabilities that will allow us to invest through business cycles and address our customers’ highest priorities.”

Reaping in on the burgeoning global demand for aircraft, UTC has been strengthening its commercial aerospace business, which includes jet engine manufacturer Pratt & Whitney. Last year, in Nov. 2018, UTC successfully closed the Rockwell Collins acquisition deal.

According to Richard Aboulafia, Aerospace Analyst at Teal Group, with the two companies’ background overlapping a little, there is a high probability that this deal will go on smoothly without much regulatory push-back.

The newly formed company would be headquartered in the Boston area, the two firms mentioned in the recent press release statement.

Post completion of this mega-merger deal, UTC’s shareholders would own a 57% majority in the new company while Raytheon’s would own a 43% stake on a diluted basis. The merger deal, named “merger of equals,” by the two companies, can be expected to close by the first half of 2020.

Like other industrial conglomerates, UTC too is planning to shed its businesses to divert its much attention towards highly profitable units. The company is already amid the process to spin-off its Otis elevator & Carrier air conditioning businesses into separate entities. However, this merger with Raytheon would in no way affect these spin-off processes, which are still on track and expected to close in the first half of 2020.

UTC’s chief executive Hayes would serve as the CEO of the combined company, and Raytheon’s CEO Thomas Kennedy would be the chairman of the combined company. Two years post the deal closure, Hayes would become the chairman.

Both Raytheon & UTC have a combined market value of nearly $166 billion. Raytheon’s shareholders will be getting 2.3348 shares in the new company for each Raytheon share.