Raytheon Company, which is among East Camden’s major defense contractors, and United Technologies Corp. said Sunday they will merge into a new company called Raytheon Technologies.
The companies called the agreement an all-stock “merger of equals.”
The merger of Raytheon with United Technologies, a leading aerospace company comprised of Collins Aerospace and Pratt & Whitney, is designed to offer a complementary portfolio of platform-agnostic aerospace and defense technologies.
Expanded technology and research and development capabilities will also be provided to customers.
The combination excludes Otis elevators and Carrier air conditioners, which are expected to be separated from United Technologies in the first half of 2020 as previously announced.
The combined company will have approximately $74 billion in pro forma 2019 sales.
Under the terms of the agreement, which was unanimously approved by the Boards of Directors of both companies, Raytheon shareowners will receive 2.3348 shares in the combined company for each Raytheon share. Upon completion of the merger, United Technologies shareowners will own approximately 57 percent and Raytheon shareowners will own approximately 43 percent of the combined company on a fully diluted basis.
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. The timing of the separation of Otis and Carrier is not expected to be affected by the proposed merger and remains on track for completion in the first half of 2020.
The merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes.
"Today is an exciting and transformational day for our companies, and one that brings with it tremendous opportunity for our future success. 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 Chairman and CEO. "With our enhanced capabilities, we will deliver value to our customers by anticipating and addressing their most complex challenges, while delivering significant value to shareowners."
"The combination of United Technologies and Raytheon will define the future of aerospace and defense," said Greg Hayes, United Technologies Chairman and CEO. "Our two companies have iconic brands that share a long history of innovation, customer focus and proven execution. By joining forces, we will have unsurpassed technology and expanded R&D capabilities that will allow us to invest through business cycles and address our customers' highest priorities. Merging our portfolios will also deliver cost and revenue synergies that will create long-term value for our customers and shareowners."
With company and customer funded R&D spending of approximately $8 billion, seven technology Centers of Excellence, and more than 60,000 engineers, the company will develop new technologies faster than ever before.
Areas of joint advancement include, but are not limited to: hypersonics and future missile systems; directed energy weapons; intelligence, surveillance, and reconnaissance (ISR) in contested environments; cyber protection for connected aircraft; next generation connected airspace; and advanced analytics and artificial intelligence for commercial aviation.
The company expects to return $18 to $20 billion of capital to shareowners in the first 36 months following completion of the merger. As a result of the combination, 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 plans to consolidate its four businesses into two businesses to be named Intelligence, Space & Airborne Systems and Integrated Defense & Missile Systems. The new businesses will join Collins Aerospace and Pratt & Whitney to form the four businesses of Raytheon Technologies.
Net debt for the combined company at the time of closing is expected to be approximately $26 billion, with United Technologies expected to contribute approximately $24 billion. The combined company targets an 'A' category credit rating at the time of the closing.
The combined company's Board of Directors will be comprised of 15 members, consisting of 8 directors from United Technologies and 7 from Raytheon, with the lead director from Raytheon. Tom Kennedy will be appointed executive chairman and Greg Hayes will be named CEO of Raytheon Technologies. Two years following the close of the transaction, Hayes will assume the role of chairman and CEO.
Raytheon Technologies will be headquartered in the greater Boston metro area, and will retain a corporate presence in existing locations. The company will be led by a highly experienced, proven leadership team with a strong track record of innovation, delivering on synergies, and meeting financial and customer commitments.
A conference call to discuss the merger will be held at 7 a.m. Monday. Participants will include Tom Kennedy, chairman and CEO of Raytheon; Greg Hayes, chairman and CEO of United Technologies; Toby O'Brien, vice president and chief financial officer of Raytheon; and Akhil Johri, executive vice president and chief financial officer of United Technologies.
The dial-in number for the conference call will be 877-280-7280. The conference call will also be audiocast online at www.raytheon.com/ir and www.utc.com. Individuals may listen to the call and download charts that will be used during the call. These charts will be available prior to the call. Interested parties are encouraged to check the website ahead of time to ensure their computers are configured for the audio stream.