Raytheon Co.'s planned merger with United Technologies Corp.is under Pentagon review even though military leaders won't get to make the call on approving one of the biggest defense industry deals ever.
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. A deal with United Technologies would allow Raytheon to expand into commercial aviation, which does not rely on government spending like the defense sector.
The Rockwell Collins acquisition paved the way for United Technologies to go forward with a three-way split that will see the Carrier building-controls and Otis elevator units stand alone in a dramatic rethinking of the company's identity.
United Technologies shareholders will own about 57 per cent of the combined business, called Raytheon Technologies Corporation, which will be led by Hayes. He added that both companies are "great" but said he anxious that the merger would "take away more competition".
Matt Stoller, fellow at the non-profit Open Markets Institute, said Trump is correct to raise anti-competition concerns over the proposed merger-while expressing skepticism that the president will hold to that position.
The combined company, Raytheon Technologies, "will be headquartered in the greater Boston area, and will retain a corporate presence in existing locations", Raytheon and UTC said in a Sunday statement.
According to the terms of the deal, Raytheon's shareholders will be given 2.3348 shares for each Raytheon share they own in the new company.
Raytheon is famous as the producer of the legendary Tomahawk air- and sea-launched cruise missile, together with radars and other electronic-warfare systems.
The new company will also assume about $26bn in net debt, but the two companies say it will return between $18bn and $20bn of capital to shareholders in the first three years after the merger. Raytheon also makes electronic warfare equipment and countermeasures for aircraft; the AN/ALE-60 towed decoy system and the Miniature Air-Launched Decoy (MALD) and MALD-J jammer variant.
Mr Hayes will hold the CEO job in the combined organisation, while Raytheon CEO Thomas Kennedy will become executive chairman.
Almost all of the 19,000 CT employees of United Technologies and its subsidiaries will remain in the state, while about 100 top executives and other workers will move to the new headquarters. United Technologies provides plane makers with electronics, communications and other equipment, while Raytheon primarily supplies the US government with military aircraft and missile equipment. Two years after the merger closes, he will add the title of chairman. It requires Federal Trade Commission review and approval, as well as the Defense Department's acquiescence. And the company also expects to capture more than $1 billion in gross annual run-rate cost synergies by year four post-close with approximately $500 million in annual savings returned to customers. Raytheon employs almost 70,000 globally.