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United Technologies, Raytheon Combine to Form New Company

In a “merger of equals,” United Technologies will combine its aerospace business with major defense contractor Raytheon, to create a new manufacturing giant in the worlds of aerospace and defense, second only in size to Boeing.

The new company, which will be named Raytheon Technologies Corporation, will offer expanded technology and R&D capabilities to deliver innovative and cost-effective solutions aligned with customer priorities and the national defense strategies of the U.S. and its allies and friends. The combined company will have approximately $74 billion in expected 2019 sales. Raytheon is worth about US$52 billion while United Technologies has a market cap of US $114 billion.

Upon completion of the merger, United Technologies share-owners will own about 57 percent of the business while Raytheon share-owners will own approximately 43 percent of the company. 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 in the first half of 2020. Greg Hayes, United Technologies Chairman and CEO, will become chief executive of the new company while Tom Kennedy, Raytheon Chairman and CEO, will be executive chairman.

“Today is an exciting and transformational day for our companies, and one that brings with it tremendous opportunity for our future success,” said Kennedy. “Raytheon Technologies will continue a legacy of innovation with an expanded aerospace and defense portfolio supported by the world’s most dedicated workforce. With our enhanced capabilities, we will deliver value to our customers by anticipating and addressing their most complex challenges, while delivering significant value to share-owners.”

“The combination of United Technologies and Raytheon will define the future of aerospace and defense,” said Hayes. “Our two companies have iconic brands that share a long history of innovation, customer focus and proven execution. 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. Merging our portfolios will also deliver cost and revenue synergies that will create long-term value for our customers and share-owners.”

While Raytheon makes missiles, radar systems and command and control technology used by militaries around the world, United Technologies’ aerospace business include engines that are used in both Airbus commercial aircraft as well as the F-35. Last year, UTC made news by acquiring Rockwell Collins, a maker of airplane parts, for $30 billion, to form Collins Aerospace.

Both companies expect the merger to close without major problems. Chinese regulators held up United Technologies’ takeover of Rockwell Collins by several weeks, but Hayes does not believe that there is there is a need for the Raytheon deal to gain antitrust approval from the country. According to industry experts, the merger would Raytheon save money throughout its supply chain while UTC will benefit from Raytheon standing in the defense sector.

Meanwhile, US President Donald Trump on Monday said he was concerned that the merger would harm competition and make it more difficult for the U.S. government to negotiate defense contracts.

“I’m a little concerned about United Technologies and Raytheon,” Trump said in an interview with CNBC. Asked whether he would have problems with the merger, Trump said, “Only if they have the same products. That would be the thing that bothers me most.”

“We are complementary, not competitive,” Raytheon CEO Tom Kennedy told CNBC. “I don’t know the last time we competed against United Technologies.”

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