A U.S. Navy guided-missile destroyer, USS Barry (DDG 52), launching Raytheon-manufactured Tomahawk missiles during the opening phases of the international military intervention that ended in the overthrow of the Libyan government in 2011.
Photo: U.S. Navy (Getty Images)

Update: 6/9/2019 at 10:10 p.m. ET: Per a Raytheon press release on Sunday, this merger is now official (and announced slightly sooner than expected). Gizmodo’s original coverage follows below.

Sometimes, when two major military contractors love money very much, they get together and reverse-mitosis into one larger military contractor.

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Defense contractor Raytheon, manufacturer of everything from Tomahawk cruise missiles to radar systems, is in advanced talks to merge with United Technologies Corp‚Äôs (UTC) aerospace unit in a deal that would be ‚Äúthe world‚Äôs second-largest aerospace-and-defense company by sales after Boeing Co., with annual revenue of more than $70 billion last year,‚ÄĚ the Wall Street Journal reported this weekend.

Months ago, UTC announced it would be spinning off its Otis elevator business, as well as its Carrier building systems division, as part of an effort to focus its business entirely around aviation‚ÄĒpart of a broader trend in which conglomerate-style businesses in the General Electric model are struggling. UTC and Raytheon are currently worth a combined $166 billion, the Journal wrote, while the merged business would still be worth north of $100 billion. UTC subsidiaries include jet engine manufacturer Pratt & Whitney, and last year UTC purchased avionics and aircraft parts manufacturer Rockwell Collins for $30 billion.

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As the Journal noted, the idea of a merger between the two companies is not new and would help them ride out any potential downturns in the aviation and defense industries:

Waltham, Mass.-based Raytheon, whose sales rose 6.7% last year to $27.1 billion, produces missiles such as the Tomahawk together with radars and other electronic-warfare systems. It has invested heavily in recent years ahead of the recent uptick in Pentagon spending, and has the biggest export business among the five largest U.S. defense contractors.

While commercial aircraft sales have been booming during an unprecedented 13-year surge in orders that has left Airbus and Boeing with backlogs of more than 13,000 jetliners, analysts have cautioned that slowing air traffic could force aircraft makers to reverse production increases... The two-year uptick in Pentagon spending on new aircraft, missiles and other defense equipment is also running out of steam, with analysts projecting muted growth over the next several years.

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News of the potential merger was confirmed by CNBC, whose source said that any deal wouldn’t be closed until 2020, when the spinoff of the elevator and air conditioning businesses could be finalized. The deal could still fall apart, but currently stands at UTC shareholders having a 53 percent majority to Raytheon’s 47 percent. As Bloomberg noted, while the merged company’s aerospace business would not match Boeing but would be ahead of Airbus SE.

[Wall Street Journal]

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