Published: Tue, June 11, 2019
Markets | By Otis Pena

Raytheon and United Technologies Merge To Create A New Aerospace Giant

Raytheon and United Technologies Merge To Create A New Aerospace Giant

By the time the deal closes, United Technologies is expected to have finished spinning off its Otis and Carrier businesses - a move that was announced previously, as part of a focus on aerospace and engines.

The combined companies will have total sales of approximately $74 million in 2019. "That would be the thing that bothers me most".

Shares of defense contractor Raytheon Co and United Technologies Corp pared gains on Monday after U.S. President Donald Trump said he was a "little concerned" about their $121 billion merger to create a new aero-defense company. United Technologies provides primarily commercial plane makers with electronics, communications and other equipment, whereas Raytheon mainly supplies the US government with military aircraft and missile equipment. "It becomes one big fat lovely company, but I have to negotiate, meaning the United States has to buy things". United Technologies and Raytheon have market capitalizations of $114 billion and $52 billion, respectively.

President Trump expressed concern Monday about the merger between United Technologies and defense contractor Raytheon, questioning whether the move would hurt competition and make it more hard for the United States to negotiate defense contracts in the future. "Raytheon Technologies will continue alegacy of innovation withan expanded aerospace and defense portfoliosupported by the world's most dedicated workforce", said Tom Kennedy, Chairman and CEO of Raytheon. Raytheon shareholders will receive 2.33 shares in the new company for each Raytheon share.

Another wildcard in winning approval for the deal: the U.S. Department of Defense. "We truly believe we're going to get this done relatively quickly".

Waltham-based Raytheon was founded in 1922 and makes missiles - including the Patriot system - and cybersecurity tools. It also provides the electronic tolling system used on the Massachusetts Turnpike and other roads around the world. Under pressure from investors, he proposed the spinoffs of Otis and Carrier.

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Pratt & Whitney, which operates as a subsidiary of United Technologies, builds the engines that power Airbus' A220, and A320neo and A380 commercial jets.

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.

"The company should be expected to make a strong play for the Defense Department's emerging hypersonic missiles programs", the Post reported.

"The RTN-UTX merger is a surprise but we see real rationales on both sides in scale, diversification in the face of cyclical uncertainty, and financial benefits", J.P. Morgan analyst Seth Seifman said in a note.

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

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