Raytheon and United Technologies are planning a merger that would create a $120 billion American aerospace and defence juggernaut

  • United Technologies and Raytheon, two of the world’s largest aerospace and defence companies, have agreed to join forces.
  • The combined company, Raytheon Technologies, could command a market capitalisation of $US120 billion and generate $US74 billion in annual revenues.
  • Shares of both companies are rallying in premarket trading – United Technologies is up 5.2% and Raytheon is up 2.8%.
  • Watch United Technologies and Raytheon trade live.

Two of the world’s largest aerospace and defence companies are joining forces to create the industry’s second-biggest player behind Boeing.

United Technologies, which makes electronics and engines for the commercial-aviation sector, and Raytheon, which manufactures missile systems and military equipment for the US government, agreed to combine their businesses on Sunday,the companies announced.

Shares of both companies are rallying in premarket trading – United Technologies is up 5.2% and Raytheon is up 2.8%.

If approved by regulators, the pair plan to merge into Raytheon Technologies, creating a company with a $US120 billion market capitalisation and $US74 billion in annual revenues. It would be a one-stop shop for Patriot and Tomahawk missiles, Pratt & Whitney F-35 fighter-jet engines, cockpit electronics, radars, and other products.

United expects to separate its air-conditioning and elevator businesses, Carrier and Otis, before the merger goes through in the first half of 2020. Raytheon shareholders will receive 2.3348 shares in the combined group for each Raytheon share they hold, giving them a 43% stake in the business. United CEO Greg Hayes will take charge of the group while Raytheon boss Tom Kennedy will serve as executive chairman.

United and Raytheon expect the tie-up to generate more than $US1 billion in cost savings within four years of completion, and plan to return between $US18 billion and $US20 billion to shareholders in the first three years. They also plan to combine research budgets and teams to explore futuristic technologies such as hypersonics, directed energy weapons, and artificial intelligence in commercial aircraft.

The new company faces a mixed outlook under the Trump administration. Higher US defence spending and rising international tensions have fuelled demand for fighter jets and munitions, according to Reuters. However, the US-China trade war threatens to weigh on global economic growth and international trade flows, including by air.

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