Raytheon (RTN) and United Technologies (UTX) have entered into an agreement to combine in an all-stock merger of equals. The combined company will be named Raytheon Technologies Corporation, and will exclude Otis and Carrier, which are expected to be separated from United Technologies in the first half of 2020 as previously announced. The combined company will have approximately $74B in pro forma 2019 sales. Under the terms of the agreement, which was unanimously approved by the Boards of Directors of both companies, Raytheon share owners 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% and Raytheon shareowners will own approximately 43% 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 combined company expects to return $18B-$20B 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 $1B in gross annual run-rate cost synergies by year four post-close, with approximately $500M in annual savings returned to customers. In addition, the combination presents significant long-term revenue opportunities from technology synergies. 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 $26B, with United Technologies expected to contribute approximately $24B. 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. There is no change to either Raytheon’s or United Technologies’ financial outlook for 2019.