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2019-07-10
Raytheon and United Technologies to Merge Creating Aerospace Giant
Raytheon and United Technologies have agreed to an all-stock "merger of equals" in a deal that is expected to create an aerospace and defence powerhouse with approximately US$74 billion in pro forma 2019 sales.
The combined company, which will be named Raytheon Technologies Corporation, will offer expanded technology and R&D capabilities to deliver innovative and cost-effective solutions in the aerospace and defence sector. It will be comprised of four divisions, Collins Aerospace and Pratt & Whitney from United Technologies (UT) and Intelligence, Space & Airborne Systems and Integrated Defense & Missile Systems from Raytheon. The transaction is slated to close in the first half of 2020, following the separation of Otis and Carrier from United Technologies as announced earlier.
Upon completion of the merger, United Technologies shareowners will own approximately 57 per cent and Raytheon shareowners will own approximately 43 per cent of the combined company on a fully diluted basis. Under the terms of the agreement, which was unanimously approved by the Boards of Directors of both companies, Raytheon shareowners will receive 2.3348 shares in the combined company for each Raytheon share. Moreover, the return of capital to shareowners is expected to be US$18 to US$20 billion in the first 36 months following completion of the merger. Whereas, net debt for the combined company at the time of closing is expected to be approximately US$26 billion, with United Technologies expected to contribute approximately US$24 billion.
Citing the merger as a tremendous opportunity for success, Tom Kennedy, Raytheon Chairman and CEO said, “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.”
Greg Hayes, United Technologies Chairman and CEO opined that the combination of United Technologies and Raytheon will define the future of aerospace and defence. “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,” he added.
The merger is the second big tie-up for United Technologies in recent years. In September 2017, the company revealed intentions to acquire Rockwell Collins. At the time, United Technologies was already the biggest aircraft parts manufacturer, while Rockwell Collins was the fourth. In November 2018, the merger was finally completed, forming new UT’s business unit called Collins Aerospace Systems.
Merger to Create Long-Term Value
Once finalised, the merger will establish a broad and complementary portfolio of cross-platform capabilities in aerospace and defence sectors creating a balanced and diversified aerospace and defence business portfolio. With a combined annual company and customer funded R&D spend of approximately US$8 billion, seven technology Centres of Excellence, and over 60,000 engineers, the company will develop new, critical technologies faster and more efficiently than ever before. Additionally, robust free cash flow growth and a strong balance sheet will support continued investment and return of capital to shareowners. The company also expects to capture more than US$1 billion in gross annual run-rate cost synergies by year four post-close, with approximately US$500 million in annual savings returned to customers. In addition, the combination presents significant long-term revenue opportunities from technology synergies.
Raytheon Technologies will be headquartered in the greater Boston metro area and will retain a corporate presence in existing locations. The company will reportedly be led by a combined Board of Directors, which will have 15 members, consisting of eight directors from United Technologies and seven from Raytheon. 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 is expected to assume the role of Chairman and CEO.
Reference Text/Photo :www.raytheon.com, www. utc.com
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