Raytheon and United Technologies in merger talks: WSJ report

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 Wall Street Journal is reporting that this weekend the management of defense contractor Raytheon agreed to merge in an all-stock deal with United Technologies (UTC).

The deal would reshape the competitive landscape by forming a conglomerate which spans commercial aviation and defence procurement.

The two companies argue they have very limited existing business overlap, with United Technologies specialising in supplying electronics to commercial plane makers, while Raytheon mostly manufactures guided missiles such as the anti-aircraft Patriot, which it sells to the U.S. government for up to $5 million each.

The president continued by noting that there were many airline companies until they "all merged in so it's hard to negotiate".

"I'm a little bit concerned about United Technologies and Raytheon", the president told the television network CNBC. "Because.it's already non-competitive".

"I hope the Raytheon deal, I hope it can happen". "I just want to see competition".

The merger between United Technologies (UTX) and Raytheon (RTN) is likely to build a broad and complementary portfolio of high-growth aerospace and defense products.

The United-Raytheon deal is expected to close in early 2020, after United's non-aerospace businesses take flight, Reuters reported.

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United Technologies includes Pratt & Whitney and Collins Aerospace. They have benefited from increased military spending by the United States and other countries and growing commercial aircraft sales.

The US spends hundreds of billions of dollars each year with defence firms.

United Technologies shareholders will own about 57 per cent of the combined business, called Raytheon Technologies Corporation, which will be led by Hayes.

"Raytheon Technologies will continue a legacy of innovation with an expanded aerospace and defense portfolio supported by the world's most dedicated workforce", said Tom Kennedy, Raytheon's current chairman and CEO. The company's board will have eight directors from United Technologies and seven from Raytheon.

A model of the Patriot anti-missile system is seen at Raytheon's exhibition center at the Farnborough aerospace show, in Farnborough, U.K.in 2008.

At United Technologies, Hayes is drastically remaking the company. The combination excludes Otis and Carrier, which are expected to be separated from United Technologies in the first half of 2020 as previously announced. In 2018 there were eight mergers exceeding $1 billion in value, including an all-stock deal between L3 Technologies and Harris and General Dynamics' acquisition of CSRA Inc., according to PricewaterhouseCoopers.

Raytheon, maker of the Tomahawk and the Patriot missile systems, and other USA military contractors are expected to benefit from strong global demand for fighter jets and munitions as well as higher US defence spending in fiscal 2020, much of it driven by Trump's administration.

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