United Technologies Corp. To Buy Raytheon Co. In All-Stock Deal

A blockbuster acquisition is taking place in the U.S. defence industry.

United Technologies Corp. (NYSE:UTX) has agreed to buy Raytheon Co. (NYSE: RTN) in an all-stock deal that will create an aerospace and defense juggernaut with $74 billion U.S. in annual sales.

The new entity will be called "Raytheon Technologies Corp." when the deal closes in the first half of 2020, the companies said in a joint news release. While billed as a merger of equals, current United Technologies shareholders will own most of the company after the transaction, which has an equity value of $86 billion, according to data compiled by Bloomberg News.

The merged companies will combine United Technologies’ Pratt & Whitney F-35 fighter jet engines with Raytheon’s Patriot missile-defense products and expertise in areas such as radars, munitions and cybersecurity. Both companies’ shares stand to benefit because of the potential synergies, which could free up capital.

In pre-market trading, United Technologies shares rose Monday 6.5% to $140.70 U.S., while Raytheon shares were up 2.8% at $191.16 U.S. Each advanced more than 20% this year through June 7, in line with a Standard & Poor’s index of aerospace and defense manufacturers.

The companies will have combined debt of about $26 billion U.S. when the deal closes.

The two defence companies said they expect to return about $20 billion U.S. to shareholders in the first 36 months after the merger and to see about $1 billion U.S. in annual cost savings by the fourth year.

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