The new entity will be called Raytheon Technologies Corp. when the deal closes in the first half of 2020, after United Technologies completes the separation of its Otis elevator and Carrier air-conditioner businesses, the companies said in a statement Sunday.
Hayes will be named CEO of Raytheon Technologies, with Tom Kennedy, current CEO and chairman of Raytheon, as executive chairman of the combined company. Companies have argued that they need greater scale to compete and spend on research and technology. Each advanced more than 20% this year through June 7, in line with a Standard & Poor's index of aerospace and defense manufacturers.
"When I hear United and I hear Raytheon, which is another incredible company, the missile systems they make are incredible, when I hear they're merging - does that take away more competition?" Hayes will ascend to both roles three years after the deal closes. The new company's name will be Raytheon Technologies Corp. - and it's expected to have almost $74 billion in annual sales. Raytheon will contribute seven of the 15 board positions, including the lead director. Under pressure from investors, he proposed the spinoffs of Otis and Carrier.
United Technologies' aerospace business makes engines for Airbus as well as the F-35, which was developed by Lockheed Martin and is the most expensive military project in history.
"An RTN-UTX deal may be a signal (a siren?) that 1) this USA defense cycle is peaking, and firms need to start repositioning for growth in 2021 and beyond; 2) Maybe the commercial aerospace outlook is looking wobbly too and Western firms need to hedge against fallout from a U.S".
"Aerospace suppliers have been, and will continue to be, under enormous pressure from Boeing and Airbus to cut costs", he said.
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"I want to see that we don't hurt our competition", Trump said in an interview with CNBC.
The Raytheon-UTC deal will need U.S. antitrust approval and a green light from the Pentagon. The report identified 300 instances in which important weapons components such as large gun barrels and submarine propeller shafts that are produced by just one company, by a "fragile" supplier that may be unable to meet demand, or by a foreign supplier.
"We don't expect DoD to raise strong objections to the deal", though there may be small divestitures where there's overlap with businesses picked up with the Rockwell Collins purchase, analyst Byron Callan of Capital Alpha Partners wrote in a note Sunday.
Even adjusting for the spinoffs, the combined market value of the merged company would be above $100 billion. There is no change to the 2019 financial outlook for either company.
■ The deal is an all-stock transaction, forming a company that would have about $74 billion in revenue this year, trailing only Boeing in the market for military and aerospace products and services. The company would retain its headquarters in the Boston area.