Raytheon and United Technologies announce $121bn merger

United Technologies Corp and Raytheon are in talks for a merger that could make the new entity the second largest defence company by sales in the world

United Technologies Corp and Raytheon are in talks for a merger that could make the new entity the second largest defence company by sales in the world

The merger remains subject to regulatory approvals and is expected to close in the first half of 2020. Obama administration defense secretary Ash Carter told reporters in 2015 that he wanted to "avoid excessive consolidation in the defense industry to the point where we did not have multiple vendors who could compete with one another on many programs". "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".

Trade tensions between the United States and China were blamed at least partly by analysts for that delay, but a source close to the deal said the companies did not expect this to be repeated because Raytheon does not do business in China.

"Does [the merger] make it less competitive?"

When asked if he'd have a problem with the merger, Trump said "Only if they have the same products". They're two great companies, I love them both.

■ Raytheon shareholders would receive 2.3348 shares in the new company for every share they now own, a ratio that doesn't provide any premium to its current stock price.

On Monday, U.S. President Donald Trump said he was a "little concerned" about the merger because it may take away competition.

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According to the report United Technologies CEO Greg Hayes would lead the combined company, while Raytheon CEO Thomas Kennedy would become chairman.

The Defense Department and big customers like Boeing Co, Lockheed Martin Corp and Northrop Grumman Corp will have a lot of clout in the antitrust review, and may worry about over-reliance on one company for a big suite of products. It makes the Patriot missile defense system, Tomahawk cruise missiles, and a range of radar, laser, and cybersecurity systems. That leaves the aerospace business, anchored by its Pratt & Whitney jet engines and avionics components, including those made by Rockwell Collins, which Hayes bought past year for $23 billion.

Part of the rationale for the deal is the huge investment needed to develop next-generation equipment such as weapons which fly faster than the speed of sound and incorporating artificial intelligence into defence systems. The companies forecast returning $18 billion to $20 billion to shareholders within three years following merger completion.

President Trump expressed concern Monday about the merger between United Technologies and defense contractor Raytheon, questioning whether the move would hurt competition and make it more hard for the United States to negotiate defense contracts in the future.

Top-line growth for United Technologies' remaining segments has been strong, but costs have been outpacing revenues, and gross margins are diminishing.

"An RTN-UTX deal may be a signal (a siren?) that 1) this US defense cycle is peaking, and firms need to start repositioning for growth in 2021 and beyond; 2) Maybe the commercial aerospace outlook is looking wobbly too and Western firms need to hedge against fallout from a U.S".

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