A deal with Raytheon would extend the transformation of United Technologies under Chief Executive Officer Greg Hayes, who is already planning to spin off the company’s Carrier climate-controls and Otis elevator operations.
United Technologies Corp. and Raytheon Co. are in talks about a deal that would create an aerospace and defense industry giant, according to a person familiar with the matter.
The all-stock transaction could be announced in the coming days, according to the Wall Street Journal, which first reported the talks. United Technologies has a market valuation of about $114 billion, while Raytheon is valued at about $52 billion.
A deal with Raytheon would extend the transformation of United Technologies under Chief Executive Officer Greg Hayes, who is already planning to spin off the company’s Carrier climate-controls and Otis elevator operations. With Raytheon, Hayes would double down on aerospace and defense after last year completing the $23 billion acquisition of Rockwell Collins, a provider of touchscreen cockpit displays and other aircraft parts.
Hayes is expected to lead the new company, while Raytheon’s Thomas Kennedy would become chairman of the combined entity, the paper said. It would be a powerhouse in defense contracting with products from Patriot missiles to the engines on Lockheed Martin Corp.’s F-35 fighter jet.
Michele Quintaglie, a spokeswoman for United Technologies, declined to comment. Mike Doble, a spokesman for Raytheon, didn’t immediately respond to a voice mail requesting comment outside of office hours.
United Technologies shares are trading at 16.6 times estimated earnings, slightly ahead of the 16 times for Raytheon. Both stocks have risen more than 20% this year, exceeding the 15% gain in the S&P 500 Index.
M&A in the industry slowed to $40 billion in the 12 months through March, according to Bloomberg Intelligence, which highlighted solid valuations in the sector.
What BI Says
“Sector pricing and competitive pressure, along with healthy end-market growth, could foster further consolidation. Valuations persist above 10-year averages.”BI Aerospace and Defense.