United’s Raytheon deal to create $100bn defence giant


Raytheon is best known for its Patriot air defense systems, which acquired notoriety during the Gulf War, and its Tomahawk cruise missiles, the long-range weapon that is used by the US Navy.

Under terms, Raytheon shareowners will receive 2.3348 shares in the combined company for each Raytheon share they hold. The deal is expected to be completed in early 2020. Last June, on the eve of announcing plans to direct the Defense Department to create a new "space force", Trump criticized Lockheed Martin and Boeing's United Launch Alliance joint venture, saying: "I don't like when Boeing and Lockheed get together because the pricing only goes up, but that's okay in this case".

Industry analysts saw fewer advantages for Raytheon, but noted that it has ensured that it is not left behind in the push to grow bigger in aerospace and defense. Approximately 57% of its shares will belong to United Technologies shareowners, with the remaining approximately 43% to Raytheon shareowners.

Sen. Chris Murphy, D-Conn., said he intends to work closely with state government officials, the Justice Department and the Pentagon to "to ensure this merger does not violate the agreement UTC signed with the state".

Hayes said the merger "had been on our radar screen for years" but could not become a reality until UTC divested itself of Otis and Carrier. It's estimated that the merger will generate robust free cash flow and strengthen the balance sheet, thereby helping the new company to enhance shareholder wealth and increase investments.

A person familiar with the matter told the newspaper that United Technologies is likely to own a majority of the combined company. Because the two companies are generating about $75 billion to $80 billion a year in cash, there will be plenty to invest in research and development and there will be "many opportunities for new franchises", Hayes said, adding that the new organization will have more than 60,000 engineers. Tom Kennedy will be appointed Executive Chairman and Greg Hayes will be named CEO of Raytheon Technologies.

Raytheon Technologies will be based near Boston.

Mr Trump, who has criticised big corporate deals throughout his presidency, said that he was "a little concerned" that the blockbuster merger would hurt competition in the aerospace industry.

"When I hear they're merging ... does that take away more competition?" asked Trump.

The president continued by noting that there were many airline companies until they "all merged in so it's hard to negotiate". "Does that make it less competitive, because it's already noncompetitive".

The Senate Armed Services Committee may press Shanahan about the merger - and whether he should recuse himself from deliberations on it because of his past role as an executive with Boeing Co., a United Technologies customer - at his expected confirmation hearing for defense secretary. A White House-commissioned report released last October concluded that "all facets of the manufacturing and defense industrial base are now under threat", and there are "entire domestic industries near extinction".