6/9/19

By Michael J. de la Merced
The New York Times

United Technologies says that it plans 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.

If this all-stock merger goes through, it would be the latest example of consolidation within the military and aerospace industries, creating a new colossus built to thrive in boom times and weather leaner ones.

Together, the aerospace businesses of Raytheon and United Technologies produce Pratt & Whitney engines, Tomahawk missiles and the F-35 fighter jet. The combined company - which will be called Raytheon Technologies - would have about $74 billion in expected sales for 2019.

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6/28/19

By Scott Deveau and Rick Clough
Bloomberg

Activist investor Dan Loeb came out against United Technologies Corp.'s proposed tie-up with Raytheon Co., saying the "ill conceived" deal makes neither financial nor strategic sense.

The chief executive officer of Third Point, whose hedge fund owns a stake in United Technologies worth about $836 million, plans to vote against the deal, Loeb said in a letter to the company's board. The agreement undervalues United Technologies' aerospace unit and CEO Greg Hayes is pushing ahead for the wrong reasons, he said.

"Since there is no strategic or financial rationale for this transaction, we can only conclude that the merger was motivated by empire building and Mr. Hayes' desire to extend his already long overdue tenure as head of a Fortune 100 company," Loeb said in the letter, confirming a report in Bloomberg News.

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6/10/19

By The Editorial Board
The Wall Street Journal

The decline and fall of American manufacturing is a oft-told story and usually fiction. The reality is that the U.S. retains significant comparative advantage in advanced manufacturing, as the merger of Raytheon Co. and United Technologies Corp. that was announced highlights.

The all-stock transaction would create Raytheon Technologies Corp., which the companies value at about $160 billion and would be second only to Boeing among U.S. defense suppliers. Raytheon, which makes Tomahawk cruise missiles and other advanced weapons, will add patents and expertise from UTC's jet-engine and aerospace divisions.

Last year the two companies spent nearly $5 billion on R&D. The CEOs say cost savings will let the combined company increase spending on research, helping preserve the U.S. lead in defense technology as China expands its spending and military footprint.

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6/10/19

By Richard Aboulafia, Aerospace & Defense
Forbes

The surprise announcement of a Raytheon-United Technologies merger will create Raytheon Technologies, a $74 billion aerospace/defense company, second only to Boeing in the US and roughly tied for third in the world (with Airbus). Yet unlike those two primes, the new entity will largely be a supplier company, creating products and technologies for other companies' platforms.

This merger was a surprise because Raytheon and UTC have very little in common in terms of business segments or programs. Yet there are four reasons to think it will work well...and one reason to be concerned.

For Raytheon, commercial work is a huge draw. As Boeing has shown in recent years, the sheer volume and growth of the commercial aviation market gives defense players a lot of pricing flexibility. The company has had a remarkable string of competition wins, often accompanied by write-offs, which are enabled by strong commercial segment profits. As our chart shows, the civil aviation industry has benefitted from long-term growth, and has come to dwarf the military side.

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