Trump says United Tech, Raytheon deal may hurt competition

12 Juin, 2019, 19:48 | Auteur: Auguste Feret
  • Raytheon

On Sunday, Raytheon and United Technologies announced they agreed to merge the defence company with United Technologies' aerospace business.

Both companies are extremely influential, and combined will be the second-largest maker of military equipment, with $74 billion in annual sales. Under the terms of the deal, UTC would own around 57 percent of the joint company. He has recused himself from dealings involving Boeing, which uses United Technologies products such as engines from its Pratt & Whitney engines division.

Hayes is set to become the leader of the new company: He'll take the titles of chairman and CEO two years after the merger is finalized. And it will offer expanded technology and R&D capabilities for delivering innovative and cost-effective solutions aligned with customer priorities and national defense strategies of the US and its allies and friends.

The headquarters of the new merged company, called Raytheon Technologies, would be in the greater Boston area.

Waltham, Mass. -based Raytheon is known for making Patriot missiles, radar systems and sensors for spacecraft and aircraft, while Farmington, Conn. -based United Technologies makes commercial airline components and fighter jet engines. "But I have to negotiate - meaning the United States has to buy things, does that make it less competitive? Before the combination, the lion's share of Raytheon's revenue came from the Pentagon and USA intelligence agencies".

"The rationale seems to address (United Technologies') needs more than Raytheon's, unless this was also about simply finding the best partner in a consolidating space", wrote Joseph DeNardi, a defense analyst with Stifel. It's estimated that the merger will generate robust free cash flow and strengthen the balance sheet, thereby helping the new company to enhance shareholder wealth and increase investments.

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The Pentagon will submit its views to the Justice Department or the Federal Trade Commission. Two years after the merger closes, he will add the title of chairman.

Matt Stoller, fellow at the non-profit Open Markets Institute, said Trump is correct to raise anti-competition concerns over the proposed merger-while expressing skepticism that the president will hold to that position.

"It's hard to negotiate when you have two companies and sometimes you get one bid", Trump said. And the company also expects to capture more than $1 billion in gross annual run-rate cost synergies by year four post-close with approximately $500 million in annual savings returned to customers. And executives from both companies have repeatedly insisted they do not compete with one another.

United Technologies fell 1.7% to $125.84 at 9:51 a.m.in NY, posting the biggest drop on the Dow Jones Industrial Average for the second straight day.

The Senate Armed Services Committee may press Shanahan about the merger - and whether he should recuse himself from deliberations on it because of his past role as an executive with Boeing Co., a United Technologies customer - at his expected confirmation hearing for defense secretary.

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