United Technologies and Raytheon will merge in early 2020.
Last week, shares of United Technologies dropped after the company announced it plans to merge with Raytheon International. The two companies announced they had agreed to an all-stock merger.
This would give the combined company a market capitalization of $155 billion. Assuming everything moves forward as planned, this would be the largest merger in the industrial industry this year.
Details about the merger
United Technologies was already in the midst of some big changes. Last November, it acquired the aviation supplier Rockwell Collins. And at the same time, the company announced it was spinning off its Otis elevators and climate control units to focus on commercial aerospace and defense.
Raytheon International has been around for nearly 100 years and is the fifth largest military contractor in the world. When the two companies merge, the combined company will be called Raytheon Technologies Corporation.
This merger will make the company one of the largest in the aerospace and defense sector. However, this announcement has elicited some inevitable pushback, both from lawmakers and investors.
Negative reactions to the merger
Immediately after the announcement of the merger, lawmakers expressed their doubts. In an interview, President Trump said he was concerned the merger would limit competition and make it harder for the U.S. government to negotiate defense contracts.
Wall Street analysts and investors have also questioned whether the merger is a good move both strategically and financially.
Investor Bill Ackman’s company owns less than 1% of United Technologies. He has claimed that the merger makes “no sense” and sent a letter to the CEO of United Technologies advising against it.
Will the merger go forward?
The CEOs of both companies have dismissed these concerns, saying there’s very little overlap between the two companies that would cause antitrust issues.
It’s difficult to evaluate how the details of the merger will affect current investors. But it does seem like investors in Raytheon Technologies will benefit more from the merger than United Technologies investors.
In spite of some of the pushback, it seems like the merger will go forward. The deal is expected to be finalized in early 2020.