Raytheon, United Technologies CEOs Respond To Merger, Trump's Concerns

A United Technologies Corp. sign stands outside the Carrier Corp. facility in Indianapolis Indiana U.S. on Thursday Dec. 1 2016

A United Technologies Corp. sign stands outside the Carrier Corp. facility in Indianapolis Indiana U.S. on Thursday Dec. 1 2016

United Technologies Corp. agreed on Sunday to combine its aerospace business with USA contractor Raytheon Co. and create a new company worth about $121 billion US, in what would be the sector's biggest ever merger.

The merger is expected to close in the first half of 2020, following completion by United Technologies of the previously announced separation of its Otis and Carrier businesses, which Hayes said he hoped would be completed early next year.

The all-stock deal was expected to close in the first half of calendar 2020.

"Under Secretary Ellen Lord is engaging with industry leadership to understand the implications and governance as a result of this acquisition", Lieutenant Colonel Mike Andrews, a department spokesman, said, referring to the Pentagon's acquisition chief in a statement Monday. For the objective, Raytheon is to consolidate its current four businesses into two, while United Technologies is already separating from Otis and Carrier, that should become independent once again.

The new company, to be called Raytheon Technologies, which will make Tomahawk missiles, the F-35 fighter jet and space suits for astronauts among other items, would have sales of about $74bn in 2019.

Raytheon share price is slightly growing after announcing a merger with United Technologies.

"This merger's going to bring together two leading companies with unsurpassed technological capabilities, both for today and into the future", said Hayes.

Donald Trump has warned he is a "little concerned" that a merger between two of the US's major defence giants could reduce competition. The combined company will be reportedly headquartered in Boston, MA.

High flier: Raytheon produces Patriot missile defence systems and focuses on radar and munitions.

"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".

United Technologies shareholders would own 57 percent of the combined company, with Raytheon shareholders owning the rest. The company's board will have 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. And the new businesses will join Collins Aerospace and Pratt & Whitney to form the four businesses of Raytheon Technologies.

The deal will be reviewed by either the Justice Department or the Federal Trade Commission to ensure that it complies with antitrust law. Because the two companies are generating about $75 billion to $80 billion a year in cash, there will be plenty to invest in research and development and there will be "many opportunities for new franchises", Hayes said, adding that the new organization will have more than 60,000 engineers.

Citigroup Global Markets was the financial adviser to Raytheon while RBC Capital Markets provided a fairness opinion and Shearman & Sterling was legal adviser to Raytheon.

Chinese authorities scrutinized United Technologies' Rockwell Collins acquisition heavily, given its footprint in that country's market.