The combined entity will be the third largest military/aerospace vendor in the world
Leading defense contractor Raytheon and aerospace behemoth United Technologies have agreed to an all-stock merger of equals, a move that will make the combined company the third largest aerospace and defense (A&D) company in the world after Boeing and Airbus. The combination will be dubbed Raytheon Technologies Corp.
"The combination of United Technologies and Raytheon will define the future of aerospace and defense," said Greg Hayes, United Technologies Chairman and CEO in a written statement. "By joining forces, we will have unsurpassed technology and expanded R&D capabilities that will allow us to invest through business cycles and address our customers' highest priorities. Merging our portfolios will also deliver cost and revenue synergies that will create long-term value for our customers and shareowners."
The combined company will have approximately $74 billion in pro forma 2019 sales. The combined resources and increased financial flexibility will allow the for extended research and development (R&D) and capital investments. "With our enhanced capabilities, we will deliver value to our customers by anticipating and addressing their most complex challenges, while delivering significant value to shareowners," said Tom Kennedy, Raytheon Chairman and CEO in a written statement. Potential areas for innovation include: hypersonics and future missile systems; directed energy weapons; intelligence, surveillance, and reconnaissance (ISR) in contested environments; cyber protection for connected aircraft; next generation connected airspace; and advanced analytics and artificial intelligence for commercial aviation.
Raytheon shareowners will receive 2.3348 shares in the combined company for each Raytheon share. Upon completion of the merger, United Technologies shareowners will own approximately 57% and Raytheon shareowners will own approximately 43% of the combined company. The deal is expected to close in the first half of 2020, after the separation of Otis and Carrier from United Technologies, which was previously agreed upon, is finished. The Boards of Directors of both companies unanimously approved the agreement.
The newly formed Raytheon Technologies Corp. will be comprised of four business units: Intelligence & Airborne Systems; Defense & Missile Systems; Collins Aerospace; and Pratt & Whitney. Combined the two companies anticipate having a combined company and customer funded R&D spend of approximately $8 billion. Further, the new entity will have seven technology Centers of Excellence, and over 60,000 engineers.
The new Board of Directors will consist of 15 members, including eight directors from United Technologies and seven from Raytheon (including the lead director). Tom Kennedy will be appointed Executive Chairman and Greg Hayes will be named CEO of Raytheon Technologies. Two years following the close of the transaction, Hayes will assume the role of Chairman and CEO, the companies said.