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United Technologies is about to agree to a merger of equals with Raytheon as part of an agreement that would create an industrial giant with a combined market value of $ 166 billion, said people informed about it.
Both groups are finalizing an all-stock deal, which could be announced Monday before the opening of the US stock markets, said one person.
The decision to bring together two of the largest US industrial groups under one roof will help them compete better as US companies face increasingly significant challenges as a result of the US President's trade war Donald Trump against China.
Gregory Hayes, President and Chief Executive Officer of United Technologies, is expected to become the CEO of the new company, while Raytheon's Thomas Kennedy will badume the presidency, an informed person said.
The Wall Street Journal has for the first time announced the news of the merger.
The agreement would create a powerful supplier of military equipment for the US government, bringing together the third largest recipient of defense spending last year, Raytheon, and the eighth largest, United Technologies. The United States Department of Defense paid about $ 24.3 billion to the United States during fiscal year 2018, a figure close to that of $ 27.4 billion paid to Boeing, the second beneficiary in importance.
An agreement would limit a wave of business in the aerospace and defense sectors. In 2017, UTC agreed to buy $ 23 billion at Rockwell Collins as part of an agreement to create one of the largest suppliers in the aerospace industry.
Last October, two other US defense companies, L-3 Technologies and Harris Corp, decided to merge to form a company generating a $ 16 billion turnover focused on defense electronics and military communications.
An agreement will also have a profound impact on the US defense industry, dominated for five decades by five "master builders" – Lockheed Martin, Boeing, Northrop Grumman, General Dynamics and Raytheon – state-of-the-art companies firepower to deliver programs for the Pentagon. The new L-3 Harris Technologies has been touted as a "sixth" non-traditional and more innovative premium.
It also comes at a difficult time for Boeing, who has focused on the fallout from the 737 Max crisis following two fatal accidents.
"It's certainly an unexpected development," said Richard Aboulafia, Defense Industry Analyst at Teal Group.
"The resulting company would be extremely diverse but exposed to extremely different markets and cycles. This would make a much more formidable supplier, with much more bargaining power, spread over their commercial and military lines. "
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