United Technologies Corp and Raytheon Co will merge to create a new company in what is seen as the largest-ever merger in the aerospace sector. Subject to regulatory approval, the deal should go through by the end of the first half of 2020 and will create a company worth an estimated US$121 billion. It is understood that the merged companies will be renamed Raytheon Technologies Corporation
The merger will create a conglomerate which will span commercial aviation and defense procurement and as United Technologies predominantly provides commercial plane makers with electronics, communications and other equipment and Raytheon primarily supplies the U.S Government with military aircraft and missile equipment, there is little overlap between the two companies, a point that will be emphasised to antitrust regulators.
In combining resources, the overall anticipated cost synergies should exceed US$1 billion by the end of the fourth year. According to Reuters, no shareholder of either company will receive a premium, with United Technologies shareholders holding a 57% stake and Raytheon shareholders holding 43%. United Technologies and Raytheon currently have a market capitalization of $114 billion and $52 billion, respectively.
Having spent US$23 billion in its acquisition of Rockwell Collins last year, United Technologies has confirmed it now intends to focus on the aerospace sector and is on course to separate its Carrier air conditioning and Otis lift businesses. The newly created company is expected to return between US$18 billion and US$20 billion of capital to shareholders in the first three years after the deal’s completion, while it is believed that the new company will also assume approximately US$26 billion in net debt.Email Post to a Friend