United’s Raytheon deal to create $100bn defence giant
United Technologies has agreed to buy Raytheon in an all-stock deal, forming an aerospace and defence giant with $74bn (€65bn) in sales in one of the industry’s biggest transactions ever.
The new entity will be called Raytheon Technologies 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.
While billed as a merger of equals, current United Technologies shareholders will own most of the combined firm, which is expected to be worth over $100bn.
The combination “will define the future of aerospace and defence,” United Technologies CEO Greg Hayes said.
The bigger company will combine United Technologies’ Pratt & Whitney F-35 fighter jet engines with Raytheon’s Patriot missile-defence products and expertise in areas such as radars, munitions and cybersecurity.
Both companies’ shares stand to benefit because of potential synergies, which could free up capital that may be deployed, Jefferies wrote in a note. In pre-market trading, United Technologies rose 3.7pc to $137, while Raytheon was 9.2pc higher at $203. Each advanced more than 20pc this year, in line with a Standard & Poor’s index of aerospace and defence manufacturers.
“It’s largely a diversification play to build an absolute behemoth aerospace and defence contractor,” said Douglas Rothacker, aerospace and defence analyst.
Mr Hayes will hold the CEO job in the combined organisation, while Raytheon CEO Thomas Kennedy will become executive chairman. Mr Hayes will ascend to both roles three years after the deal closes.
Under terms, Raytheon shareowners will receive 2.3348 shares for each Raytheon share they hold. When the dust settles, shareholders of United Technologies will own around 57pc of the new firm while Raytheon’s will own around 43pc.