Defense stocks were on the move Monday after Raytheon and United Technologies agreed to merge.

A combined company would generate $74 billion in annual sales, making it the second-largest aerospace and defense company in the U.S.

While President Donald Trump expressed concern a deal could make the industry less competitive, Raytheon CEO Tom Kennedy tells CNBC the two companies are more like partners than competitors.

"We're complementary. We're not competitive," said Kennedy. "They have some complementary technologies, we bring together with our technologies to go to the marketplace. In this case here, we're going to be able to take about $8 billion of research and development spend and our 60,000 engineers to develop the next-level technologies to create the next generation franchises so we can go to the international/global marketplace and win those markets and then bring that stuff back to the U.S. to create more jobs."

Sheila Kahyaoglu, aerospace and defense analyst at Jefferies, says companies in the industry see mergers as the best way forward.

"It reminds us a lot of Harris and L3. You have to keep moving to get ahead. If you think about the budget, it's $730 billion so not an Uber-sized addressable market … it's still off of a very low base, so we have a good addressable market. It's just these companies are seeing a way of merging, and bigger is better, and defense seems to be the theme."

Ron Epstein, research analyst at Bank of America, sees a formidable player in the industry once the merger goes through.

"The underlying point of this transaction is a couple things. One, for United Technologies, basically they're swapping out Otis elevator and Carrier air conditioner for Raytheon. And no offense to Otis and Carrier, but Raytheon is a far superior asset. So with the spinout of those companies from UTC, Mr. Hayes has rebuilt this portfolio to a technology juggernaut. The combination here ... a defensive, high-tech portfolio, it really is a spectacular combination."

Tim Lesko, principal at Granite Investment Advisors, says sell-offs have presented buying opportunities for companies and investors. </s> United Technologies Corp. is near a deal to combine with military contractor Raytheon Co., according to people familiar with the matter, the latest move by the sprawling conglomerate to transform into a company focused on aerospace and defense.

The companies, which together have a market value of roughly $166 billion, could announce a deal in the coming days assuming talks don't fall apart at the last minute, the person said.

Exact terms couldn't be learned but United Technologies shareholders are likely to own a majority of the combined company.

The tie-up, expected to be billed as a merger-of-equals, wouldn't affect United Technologies' existing plans to spin off its Otis elevator and Carrier building-systems businesses into separate companies. Raytheon would be combining with United's remaining aerospace business, and all transactions would take place at the same time. United Technologies has said the spinoffs will take place in the first half of next year.

Adjusting for the spinoffs, the companies' combined market value would likely still be north of $100 billion. The new entity would be the world's second-largest aerospace-and-defense company by sales after Boeing Co., with annual revenue of more than $70 billion last year.

In addition to other benefits from increased scale, the proposed deal could help the enlarged company weather any slowdown in the commercial aerospace and defense markets.

United Technologies Chairman and Chief Executive Greg Hayes is expected to lead the combined company, while Raytheon Chairman and CEO Thomas Kennedy would be chairman, the person said.

United Technologies has a market value of roughly $114 billion, while Raytheon's is about $52 billion.

The deal would be one of the largest in a year that has included some big mergers but otherwise has been lackluster. Right now the biggest proposed acquisition is Bristol-Myers Squibb Co.'s $74 billion purchase of rival drugmaker Celgene Corp.

A United Technologies-Raytheon combination has long been speculated on by analysts and investors, given that the two companies operate in mainly different segments and could benefit from sharing technology.

It would unite the maker of Pratt & Whitney engines -- used on commercial airliners such as the Airbus SE A320neo -- and the F-35 combat jet, with Raytheon, the fourth-largest U.S. defense contractor by revenue.

Farmington, Conn.-based United Technologies, which acquired Rockwell Collins for $23 billion late last year, is one of America's last remaining big industrial conglomerates -- though it is set to radically transform with the spinoffs and now the merger.

The Otis elevator division and Carrier building-systems businesses will become separate publicly traded companies, leaving United Technologies as a pure-play aerospace company. The rationale for the split was clear in the company's first-quarter results as the aerospace portions of its business posted strong growth.

Investors are pressuring traditional conglomerates to become more focused. Rivals Honeywell International Inc. and General Electric Co. are both shaving off units to streamline their businesses.

Several activist investors had pushed United Technologies to split, and Mr. Hayes has openly expressed his preference for smaller, more focused companies. Before the Rockwell deal, the company's revenue was about evenly split between airplanes and buildings.

Waltham, Mass.-based Raytheon, whose sales rose 6.7% last year to $27.1 billion, produces missiles such as the Tomahawk together with radars and other electronic-warfare systems. It has invested heavily in recent years ahead of the recent uptick in Pentagon spending, and has the biggest export business among the five largest U.S. defense contractors.

While commercial aircraft sales have been booming during an unprecedented 13-year surge in orders that has left Airbus and Boeing with backlogs of more than 13,000 jetliners, analysts have cautioned that slowing air traffic could force aircraft makers to reverse production increases.

The two-year uptick in Pentagon spending on new aircraft, missiles and other defense equipment is also running out of steam, with analysts projecting muted growth over the next several years.

The U.S. defense industry has morphed from about 60 big companies at the start of the 1980s to only five prime contractors today. Pentagon leaders have indicated they wouldn't allow further mergers between the main players -- Lockheed Martin Corp., Boeing, Northrop Grumman Corp., General Dynamics and Raytheon.

However, combining United Technologies' aerospace assets with Raytheon is likely to attract less scrutiny given that the companies have almost no overlap in their defense businesses.

Thomas Gryta and Doug Cameron contributed to this article. </s> (Reuters) - United Technologies Corp agreed on Sunday to combine its aerospace business with U.S. defense contractor Raytheon Co and create a new company worth more than $120 billion, in what would be the industry’s biggest ever merger.

The deal would reshape the competitive landscape by forming a conglomerate which spans commercial aviation and defense equipment. United Technologies provides primarily commercial plane makers with electronics, communications and other equipment, whereas Raytheon mainly supplies the U.S. government with military aircraft and missile equipment.

Raytheon shareholders will receive 2.3348 shares in the combined company for each Raytheon share, the companies said in a statement. The merger is expected to result in more than $1 billion in cost synergies by the end of the fourth year.

United Technologies shareholders will own about 57% of the combined business, called Raytheon Technologies Corporation, which will be led by Greg Hayes, the current chief executive of United Technologies. Raytheon shareholders will own the remaining stake, and Raytheon CEO Tom Kennedy will be named executive chairman.

United Technologies and Raytheon have market capitalizations of $114 billion and $52 billion, respectively.

The deal is expected to close in the first half of 2020, following the previously announced spin-off of United Technologies’ Carrier air conditioning and Otis elevator businesses.

The newly created company is expected to return between $18 billion and $20 billion of capital to shareholders in the first three years after the deal’s completion, the companies said. The new company will also assume about $26 billion in net debt, they added.

Raytheon, maker of the Tomahawk and the Patriot missile systems, and other U.S. military contractors are expected to benefit from strong global demand for fighter jets and munitions as well as higher U.S. defense spending in fiscal 2020, a lot of it driven by U.S. President Donald Trump’s administration.

However, Pentagon spending is projected to slow down after an initial boost under Trump. A deal with United Technologies would allow Raytheon to expand into commercial aviation, which does not rely on government spending like the defense sector.

United Technologies could benefit from reducing its exposure to commercial aerospace clients amid concerns that the rise of international trade protectionism will weigh on the flow of goods through air traffic.

The International Air Transport Association, which represents about 290 carriers accounting for more than 80% of global air traffic, cited these concerns earlier this month, when it said the industry is expected to post a $28 billion profit in 2019, down from a December forecast of $35.5 billion. </s> United Technologies Corp. agreed to buy Raytheon Co. in an all stock deal, forming an aerospace and defense giant with US$74 billion in sales through one of the industry’s biggest deals ever.

The new entity will be called Raytheon Technologies Corp., the companies said in a statement Sunday. The combination, which they are billing as a merger of equals, will take place in the first half of 2020 after United Technologies’ planned spinoff of its Otis elevator and Carrier air-conditioner businesses.

“The combination of United Technologies and Raytheon will define the future of aerospace and defense,” United Technologies Chief Executive Officer Greg Hayes said in the statement. He will hold that same role in the combined organization, while Raytheon CEO Thomas Kennedy will become chairman, the companies said.

Under terms, Raytheon shareowners will receive 2.3348 shares in the combined company for each Raytheon share they hold. When the dust settles, United Technologies shareowners will own approximately 57% of the combined company on a fully diluted basis and Raytheon shareowners will own approximately 43%. Raytheon will hold seven of the 15 board positions.

The blockbuster deal caps a dramatic revamp of United Technologies under Hayes, who took the reins at the industrial conglomerate in 2014 with a vow to pursue big transactions. Along with last year’s $23 billion acquisition of aircraft-parts supplier Rockwell Collins, the Raytheon deal remakes United Technologies as an aerospace behemoth with products including jet engines, missiles, cockpit electronics and radars.

Both companies advanced more than 20% this year through June 7, in line with a Standard & Poor’s index of aerospace and defense manufacturers.

Greater heft would enhance the ability of United Technologies to withstand cost pressures from customers such as Boeing Co. and Airbus SE, said Douglas Rothacker, an analyst at Bloomberg Intelligence. Another crucial customer is the U.S. Department of Defense.

“Aerospace suppliers have been, and will continue to be, under immense pressure from Boeing and Airbus to cut costs,” Rothacker said. “We’ve seen consolidation in the sector as a way to counter these pricing and competitive pressures, and also diversify to add revenue streams.”

Another wildcard in winning approval for the deal: the U.S. Department of Defense. Hayes spurned a merger offer from Honeywell International Inc. in 2016, saying the deal undervalued his company and would face customer opposition. At the time, Wall Street analysts anticipated resistance from the Pentagon, as well as planemakers. </s> WALTHAM, Mass. (AP) — Raytheon Co. and United Technologies Corp. are merging in a deal that creates one of the world's largest defense companies.

The merger, announced Sunday, will close in the first half of 2020 after United Technologies completes the separation of its Otis and Carrier businesses. Raytheon shareholders will receive 2.33 shares in the new company for each Raytheon share.

The combined company, named Raytheon Technologies, will be based near Boston. United Technologies' current Chairman and CEO Greg Hayes will be its CEO. Raytheon chief Tom Kennedy will be its executive chairman.

Waltham-based Raytheon was founded in 1922 and makes missile and cybersecurity systems. Connecticut-based United Technologies was founded in 1934 and serves the aerospace and building sectors.

The combined companies will have total sales of approximately $74 billion this year.

This story has been corrected to show that revenue of the combined companies will be $74 billion, not million. </s> The Raytheon Company and United Technologies Corp. are merging in an all-stock deal that the two companies say is a merger of equals. The new company’s name will be Raytheon Technologies Corp. — and it’s expected to have nearly $74 billion in annual sales.

The new defense and aerospace company would be second only to Boeing in the U.S., according to the latest Forbes 500 rankings by annual revenue. On that list, Boeing had more than $101 billion in revenue while another rival, Lockheed Martin, racked up $53.7 billion, according to Forbes.

“The combination of United Technologies and Raytheon will define the future of aerospace and defense,” United Technologies Chairman and CEO Greg Hayes said in a statement about the deal.

Hayes is set to become the leader of the new company: He’ll take the titles of chairman and CEO two years after the merger is finalized.

Under the deal, United Technologies’ shareholders will own around 57 percent and Raytheon shareholders will own about 43 percent of the merged company. Both Raytheon’s and United’s board of directors have unanimously approved the merger, which is expected to close during the first half of 2020.

The headquarters of Raytheon Technologies will be in the Boston metro area, the companies say. Raytheon is currently based in Waltham, Mass., while United is based in Farmington, Conn.

The deal brings together two companies that have been integral to the U.S. technological explosion in the past nearly 100 years. United’s list of accomplishments range from transmitting the first photo via satellite to receiving the first GPS signal. Raytheon’s engineers invented both the microwave oven and the Patriot missile. In 1997, Raytheon acquired trailblazing Hughes Aircraft, which was founded by late billionaire Howard Hughes.

“Raytheon Technologies will continue a legacy of innovation with an expanded aerospace and defense portfolio supported by the world’s most dedicated workforce,” said Tom Kennedy, Raytheon’s current chairman and CEO. He’ll be the new company’s executive chairman.

The merger is subject to approval by government regulators, as well as by the two companies’ shareholders. But the pair have already unveiled a website touting their merger.

Under the deal, the new Raytheon will consolidate its operations into four businesses. One will be based on intelligence and aerospace and another based on defense and missile systems. Those entities will join Collins Aerospace (the recently acquired Rockwell Collins Inc.) and jet engine maker Pratt & Whitney — two of United’s high-revenue divisions.

“By joining forces, we will have unsurpassed technology and expanded R&D capabilities,” Hayes said. “Merging our portfolios will also deliver cost and revenue synergies that will create long-term value for our customers and shareowners.”

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. </s> Raytheon and United Technologies will join to create a massive aerospace and defense company in a sector that is already rapidly consolidating.

The combined company, which will count among its portfolio of weaponry the F-35 fighter jet engines, Patriot and Tomahawk missile systems in addition to space suits and intelligence technology as well as Pratt & Whitney engines used in both commercial and military aircraft, anticipates annual revenue of $74 billion if approved.

That means it still trails Boeing Co. in heft, but the deal may give the soon to be renamed Raytheon Technologies Corp. leverage with suppliers and contractors over other heavyweights in the industry like Lockheed Martin Corp. and Northrop Grumman Corp.

Costs for the company could eventually be trimmed by $1 billion each year as it strips away duplicative functions.

The combined company would be valued at well over $100 billion even after United Technologies completes the planned spin-off of a good chunk of its commercial, industrial wing. The deal is expected to close in the first half of 2020, after those assets are shed by United Technologies.

"The combination of United Technologies and Raytheon will define the future of aerospace and defense," said Greg Hayes, United Technologies chairman and CEO, who will become the CEO of the combined company.

The companies will push to develop new technologies more quickly with combined R&D spending of $8 billion annually and more than 60,000 engineers. Raytheon Technologies will focus on hypersonics — vehicles or weapons which can fly five times faster than the speed of sound — as well as intelligence and surveillance systems, artificial intelligence for commercial aviation and cybersecurity for connected planes.

The deal would push United Technologies further from the cyclical nature of its commercial businesses, and more deeply into the defense sector.

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.

"The rationale seems to address (United Technologies') needs more than Raytheon's, unless this was also about simply finding the best partner in a consolidating space," wrote Joseph DeNardi, a defense analyst with Stifel. "A scenario whereby Raytheon would be competing longer-term against Lockheed Martin and a combined Northrop + (United Technologies) may have been an unacceptable outcome of consolidation for Raytheon."

DeNardi also once saw Boeing as the likely buyer of Raytheon, but said it may have been hobbled by the grounding of its fleet of its 737 Max aircraft.

Raytheon shareholders will receive 2.33 shares in the new company for each Raytheon share. Once the merger is complete, United Technologies shareholders will own approximately 57% of the company; Raytheon shareholders will own the rest.

Two years after the deal closes, Hayes will also become chairman. Until then, Raytheon Chairman and CEO Tom Kennedy will be the executive chairman. The company's board will have eight directors from United Technologies and seven from Raytheon.

Both executives said Monday that there is little overlap between the companies and that they do not anticipate pushback from anti-monopoly regulators.

However, President Donald Trump voiced concerns about the deal when he phoned in to the CNBC early Monday.

"When I hear they're merging ... does that take away more competition?" asked Trump. "It becomes one big, fat beautiful company, but I have to negotiate, meaning the United States has to buy things. Does that make it less competitive?"

In 2018 there were eight mergers in defense and aerospace exceeding $1 billion in value, including an all-stock deal between L3 Technologies and Harris, and General Dynamics' acquisition of CSRA Inc., according to PricewaterhouseCoopers.

Raytheon Co., is based in Waltham, Massachusetts. United Technologies Corp., based in Farmington, Connecticut. Raytheon Technologies will be based near Boston.

Follow @ChiTribBusiness on Facebook and @ChiTribBiz on Twitter. </s> Waltham, Mass. – Raytheon Co. and United Technologies Corp. are merging in a deal that creates one of the world’s largest defense companies.

The merger, announced Sunday, will close in the first half of 2020 after United Technologies completes the previously planned separation of its Otis and Carrier businesses.

Raytheon shareholders will receive 2.33 shares in the new company for each Raytheon share. Once the merger is complete, United Technologies shareholders will own approximately 57% of the company; Raytheon shareholders will own the rest.

The combined company, named Raytheon Technologies Corp., will be a powerhouse of defense research and technology, with total sales of approximately $74 billion this year. That would top giants like Lockheed Martin Corp. and Northrop Grumman Corp.

Waltham-based Raytheon was founded in 1922 and makes missiles – including the Patriot system – and cybersecurity tools. Connecticut-based United Technologies was founded in 1934 and makes products for the aerospace and building sectors, including airplane engines and spacesuits.

The companies said they will be able to develop new technologies more quickly with combined R&D spending of $8 billion annually and more than 60,000 engineers. Raytheon Technologies will focus on hypersonics – vehicles or weapons which can fly faster than the speed of sound – as well as intelligence and surveillance systems, artificial intelligence for commercial aviation and cybersecurity for connected planes.

Eventually, the companies expect the merger will cut $1 billion in costs annually, half of which will be returned to customers.

“Our two companies have iconic brands that share a long history of innovation, customer focus and proven execution,” said United Technologies Chairman and CEO Greg Hayes in a statement.

Hayes will become the CEO of Raytheon Technologies. Two years after the merger closes, he will add the title of chairman. Raytheon Chairman and CEO Tom Kennedy will be appointed executive chairman. The company’s board will have eight directors from United Technologies and seven from Raytheon.

Raytheon Technologies will be based near Boston. That brought a complaint from U.S. Sen. Richard Blumenthal, a Democrat from Connecticut, who said he is troubled by the potential impact of the headquarters moving to Massachusetts. Blumenthal, a member of the Senate Armed Services Committee, also urged the Defense Department, the Justice Department and other agencies to examine the potential impact on costs and competition in the defense industry.

Defense mergers have been increasing as companies – flush with cash from the rising defense budget – look to ensure future growth. In 2018 there were eight mergers exceeding $1 billion in value, including an all-stock deal between L3 Technologies and Harris and General Dynamics’ acquisition of CSRA Inc., according to PricewaterhouseCoopers.

This story has been corrected to show that revenue of the combined companies will be $74 billion, not million. </s> (Hatha al-Youm | Iraq News )- Raytheon and United Technologies will join to create amassive aerospace and defense company in a sector that is already rapidlyconsolidating.The combined company, which will count among its portfolioof weaponry the F-35 fighter jet engines, Patriot and Tomahawk missile systemsin addition to space suits and intelligence technology as well as Pratt &Whitney engines used in both commercial and military aircraft, anticipatesannual revenue of $74 billion if approved.That means it still trails Boeing Co. in heft, but the dealmay give the soon to be renamed Raytheon Technologies Corp. leverage withsuppliers and contractors over other heavyweights in the industry like LockheedMartin Corp. and Northrop Grumman Corp.Costs for the company could eventually be trimmed by $1billion each year as it strips away duplicative functions.The combined company would be valued at well over $100billion even after United Technologies completes the planned spin-off of a goodchunk of its commercial, industrial wing. The deal is expected to close in thefirst half of 2020, after those assets are shed by United Technologies.“The combination of United Technologies and Raytheon willdefine the future of aerospace and defense,” said Greg Hayes, UnitedTechnologies chairman and CEO, who will become the CEO of the combined company.The companies will push to develop new technologies morequickly with combined R&D spending of $8 billion annually and more than60,000 engineers. Raytheon Technologies will focus on hypersonics — vehicles orweapons which can fly five times faster than the speed of sound — as well asintelligence and surveillance systems, artificial intelligence for commercialaviation and cybersecurity for connected planes.The deal would push United Technologies further from thecyclical nature of its commercial businesses, and more deeply into the defensesector.Industry analysts saw fewer advantages for Raytheon, butnoted that it has ensured that it is not left behind in the push to grow biggerin aerospace and defense.“The rationale seems to address (United Technologies’) needsmore than Raytheon’s, unless this was also about simply finding the bestpartner in a consolidating space,” wrote Joseph DeNardi, a defense analyst withStifel. “A scenario whereby Raytheon would be competing longer-term againstLockheed Martin and a combined Northrop + (United Technologies) may have beenan unacceptable outcome of consolidation for Raytheon.”DeNardi also once saw Boeing as the likely buyer ofRaytheon, but said it may have been hobbled by the grounding of its fleet ofits 737 Max aircraft.Raytheon shareholders will receive 2.33 shares in the newcompany for each Raytheon share. Once the merger is complete, UnitedTechnologies shareholders will own approximately 57% of the company; Raytheonshareholders will own the rest.Two years after the deal closes, Hayes will also becomechairman. Until then, Raytheon Chairman and CEO Tom Kennedy will be theexecutive chairman. The company’s board will have eight directors from UnitedTechnologies and seven from Raytheon.Both executives said Monday that there is little overlapbetween the companies and that they do not anticipate pushback fromanti-monopoly regulators.However, President Donald Trump voiced concerns about thedeal when he phoned in to the CNBC early Monday.“When I hear they’re merging... does that take away morecompetition?” asked Trump. “It becomes one big, fat beautiful company, but Ihave to negotiate, meaning the United States has to buy things. Does that makeit less competitive?”In 2018 there were eight mergers in defense and aerospaceexceeding $1 billion in value, including an all-stock deal between L3Technologies and Harris, and General Dynamics’ acquisition of CSRA Inc.,according to PricewaterhouseCoopers.Raytheon Co., is based in Waltham, Massachusetts. UnitedTechnologies Corp., based in Farmington, Connecticut. Raytheon Technologieswill be based near Boston.Shares of Raytheon rose about 2% early Monday, a day afterthe deal was announced. United Technologies fell 2%.
Defense contractors United Technologies and Raytheon agree to merge into a combined company that would generate $74 billion in annual sales, making it the second-largest aerospace and defense company in the U.S.