Raytheon is in late-stage talks to combine with United Technologies' aerospace unit in an all-stock deal to create a new company worth more than $100 billion, a tie-up that would consolidate the aviation and defense sectors, according to a source familiar with the matter.
The deal, which could be announced as early as Monday morning, would combine United Technologies' aerospace business with Raytheon and bring the two suppliers to giants like Airbus, Boeing and Lockheed Martin under one roof.
For Tomahawk missile-maker Raytheon, the deal provides exposure to the booming commercial aerospace sector through the United Technologies' unit, which makes everything from high-value jet engines and competes with General Electric, to cockpit controls, aircraft seats and cabin interiors for passenger jets. United Technologies would gain footing in the cyber-security and defense sectors through the deal.
Farmington, Conn.-based United Technologies in November 2018 announced it was spinning off its Otis elevator business and its Carrier air conditioning unit, into separate companies. The aerospace business would be combined with Raytheon, the person said. United Technologies CEO Gregory Hayes would become CEO of the combined company, which would be called Raytheon Technologies, and Raytheon's CEO Thomas Kennedy would become chairman, according to the person.
Raytheon and United Technologies have a combined market value of nearly $166 billion. United Technologies has been beefing up its commercial aerospace business, which includes jet engine maker Pratt and Whitney. In November 2018, it closed its acquisition of Rockwell Collins.
The new company, after Carrier and Otis are separated out, is expected to have a combined market value of more than $100 billion, the person said.
The deal, a so-called merger of equals, wouldn't close before 2020, when United Technologies expects to complete the separation of the elevator and air conditioning businesses, the person said. If completed, United Technologies shareholders are expected to have a majority with about 53% of the new company, while Raytheon's would own 47%, the person added.
United Technologies would have eight board seats and Raytheon would have seven, said the source.
The deal, which could still fall apart, was reported earlier by The Wall Street Journal. Deal talks started several months ago, the source said.
The combined company would be headquartered in the Boston metropolitan area, the person said. Raytheon is based in Waltham, Mass., a Boston suburb.
RBC and Citigroup are advising Raytheon on the deal and Morgan Stanley and Evercore are working with United Technologies, according to the person.
Raytheon declined to comment. United Technologies did not immediately respond to a request for comment.