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MoneyUnited Technologies, Raytheon to create aerospace giant

20:41  10 june  2019
20:41  10 june  2019 Source:   msn.com

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United Technologies said on Sunday that it planned to combine its aerospace business with Raytheon , uniting the two into a new manufacturing giant in the worlds of aerospace and military weapons and aircraft. Such a move, meant to create businesses with greater focus, has followed a

United Technologies, Raytheon to create aerospace giant© Bloomberg A model of a Raytheon Co. fighter jet is seen on display on the second day of the Farnborough International Airshow in Farnborough, U.K., on Tuesday, July 20, 2010.

(Bloomberg) -- United Technologies Corp. agreed to buy Raytheon Co. in an all-stock deal, forming an aerospace and defense giant with $74 billion in sales in one of the industry’s biggest transactions ever.

The new entity will be called Raytheon Technologies Corp. when the deal closes in the first half of 2020, after United Technologies completes the separation of its Otis elevator and Carrier air-conditioner businesses, the companies said in a statement Sunday. While billed as a merger of equals, current United Technologies shareholders will own most of the combined company, which is expected to be worth well over $100 billion, according to Bloomberg Intelligence.

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(Reuters) - United Technologies Corp agreed on Sunday to combine its aerospace business with U.S. contractor Raytheon Co and create a new company worth about 1 billion, in what would be the sector’s biggest ever merger. The deal would reshape the competitive landscape by forming a

The deal would reshape the competitive landscape by forming a conglomerate which spans commercial aviation and defense procurement. United Technologies provides primarily commercial plane makers with electronics, communications and other equipment

The combination “will define the future of aerospace and defense,” United Technologies Chief Executive Officer Greg Hayes said in the statement. The bigger company will combine United Technologies’ Pratt & Whitney F-35 fighter jet engines with Raytheon’s Patriot missile-defense products and expertise in areas such as radars, munitions and cybersecurity.

Both companies’ shares stand to benefit because of the potential synergies, which could free up capital that may be deployed, Jefferies wrote in a note.

Raytheon climbed 1.4% to $188.55 at 10:59 a.m. Monday in New York, while United Technologies fell 2% to $129.47. Each advanced more than 20% this year through June 7, in line with a Standard & Poor’s index of aerospace and defense manufacturers.

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The deal would reshape the competitive landscape by forming a conglomerate which spans commercial aviation and defense procurement. United Technologies provides primarily commercial plane makers with electronics, communications and other equipment

Raytheon and United Technologies plan to merge in a deal that could create a new aerospace and defense giant . Julian Satterthwaite reports.

What Bloomberg Intelligence Says

“It’s largely a diversification play to build an absolute behemoth aerospace and defense contractor.”

--Douglas Rothacker, aerospace, defense analyst

Click here to view the piece

United Technologies makes both commercial and military engines, while Raytheon is focused most on defense, according to Rothacker.

Hayes will hold the CEO job in the combined organization, while Raytheon CEO Thomas Kennedy will become the executive chairman. Hayes will ascend to both roles two years after the deal closes.

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Under terms, Raytheon stockholders will receive 2.3348 shares in the combined company for each Raytheon share they hold. When the dust settles, shareholders of United Technologies will own approximately 57% of the new firm on a fully diluted basis while Raytheon’s will own approximately 43%. Raytheon will contribute seven of the 15 board positions, including the lead director.

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While United Technologies and Raytheon have some common customers, their business overlap is limited, an argument the companies plan to make once U.S Conversely, United Technologies could benefit from reducing its exposure to commercial aerospace clients amid concerns that the rise of

The deal would reshape the competitive landscape by forming a conglomerate which spans commercial aviation and defense procurement. United Technologies provides primarily commercial plane makers with electronics, communications and other equipment

United Technologies isn’t paying a premium for Raytheon, taking into account the separation of the Otis and Carrier businesses, according to a person familiar with the matter, who asked not to be identified because the information is private.

Hayes Vision

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 giant with products including not only jet engines and missiles but other items like cockpit electronics and radars.

Greater heft would enhance the ability of United Technologies to withstand cost pressures from customers such as Boeing Co. and Airbus SE, said Rothacker, the Bloomberg analyst. 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,” he said. “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.”

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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

United Technologies and defense contractor Raytheon agreed to merge in an all-stock deal described as a “merger of equals,” the companies announced The deal to create the new company is expected to close in the first half of 2020, after United Technologies completes its spinoff of elevator-maker

Another wildcard in winning approval for the deal: the U.S. Defense Department.

President Donald Trump said he would be concerned about the combination if there is overlap in the companies’ offerings.

“When I hear they’re merging, does that take away more competition?” Trump said in an interview Monday on CNBC. “It’s hard to negotiate when you have two companies and sometimes only one bid.”

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.

“We don’t expect DoD to raise strong objections,” to the Raytheon deal though there may be small divestitures where there’s overlap with businesses picked up with the Rockwell Collins purchase, analyst Byron Callan of Capital Alpha Partners wrote in a note Sunday. Some of that overlap may not be readily apparent because programs are classified, he wrote.

Financial Outlook

The companies will have combined debt of about $26 billion when the deal closes, with about $24 billion of that coming from United Technologies, the companies said in their statement. There is no change to the 2019 financial outlook for either company.

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The new entity will be called Raytheon Technologies Corp. when the deal closes in the first half of 2020, after United Technologies completes the separation of its Otis elevator and Carrier air-conditioner businesses, the companies said in a statement Sunday.

United Technologies Corp have agreed to combine its aerospace business with US contractor Raytheon and create a new company worth about 1 billion(€107bn), in what would be the sector’s biggest ever merger. The deal would reshape the competitive landscape by forming a conglomerate.

The companies said they expect to return $18 billion to $20 billion to shareholders in the first 36 months after the merger and to see about $1 billion in annual cost savings by the fourth year.

The headquarters will be in the Boston area; currently United Technologies is based on Farmington, Connecticut, while Raytheon’s headquarters is in Waltham, Massachusetts.

Citigroup Inc. was Raytheon’s financial adviser, with RBC Capital Markets LLC providing a fairness opinion and Shearman & Sterling LLP serving as its legal adviser. On the United Technologies side, Morgan Stanley, Evercore and Goldman Sachs Group Inc. were the financial advisers and Wachtell, Lipton, Rosen & Katz provided legal services.

(Updates share action in fifth paragraph. Previous versions of this story corrected the timing for a leadership change and removed an equity value.)

--With assistance from Katherine Chiglinsky, Hailey Waller and Nabila Ahmed.

To contact the reporter on this story: Richard Clough in New York at [email protected]

To contact the editors responsible for this story: Brendan Case at [email protected], Tony Robinson, Susan Warren

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.

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