Published: Wed, June 12, 2019
Markets | By Otis Pena

Raytheon and United Technologies announce $121bn merger

Raytheon and United Technologies announce $121bn merger

Defense contractor Raytheon and aerospace giant United Technologies have agreed to an all-stock merger this weekend that will create the second largest aerospace company in the world.

"Under Secretary Ellen Lord is engaging with industry leadership to understand the implications and governance as a result of this acquisition", Lieutenant Colonel Mike Andrews, a department spokesman, said, referring to the Pentagon's acquisition chief in a statement Monday.

President Trump has poured cold water on a $120 billion merger between United Technologies and Raytheon by suggesting that the deal could make it harder for the Pentagon to negotiate weapons contracts.

The new entity will be called Raytheon Technologies when the deal closes in the first half of next year, after United Tech completes the separation of its Otis elevator and Carrier airconditioner businesses, the companies said in a statement.

"I think once [President Trump] understands the benefits of this merger in terms of what it's going to do to reduce costs to the government, what it's going to do to improve the technology of the USA government and our defense profile, and what it's going to do for jobs in this country, I think he's going to be supportive, as he has been for both companies over the course of this administration", United Technologies Chairman and CEO Greg Hayes told CNBC soon after the president called in. "We've seen consolidation in the sector as a way to counter these pricing and competitive pressures, and also to diversify to add revenue streams".

United Technologies and Raytheon Company confirmed merger plans on June 9, 2019. Asked about Trump's views on the deal, he said he would talk to the president later on Monday.

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The defense contractor Raytheon - now headquartered in Waltham, Massachusetts - was originally founded in Cambridge in 1922. Mr Hayes will ascend to both roles three years after the deal closes.

"We look forward to working with Raytheon Technologies Corp, to provide the best capabilities our warfighters deserve, as the greatest value to the taxpayer". The company's board will have eight directors from United Technologies and seven from Raytheon.

"The combined 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 USA and its allies and friends", a joint statement from the two companies read. And executives from both companies have repeatedly insisted they do not compete with one another. At the time, United Technologies was already the biggest aircraft parts manufacturer, while Rockwell Collins was the fourth.

A model of the Patriot anti-missile system is seen at Raytheon's exhibition center at the Farnborough aerospace show, in Farnborough, 2008.

Those savings are one reason the US Department of Defense "is going to really like this deal", Hayes told analysts on a conference call.

" It's like a mirror, we don't have overlap", Hayes said.

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