US: United Technologies and Raytheon consider mega-merger

United Technologies is nearing a deal to merge its aerospace business with US defense contractor Raytheon and form a new company worth well over US$100 billion, reported the Financial Times.

United Technologies and Raytheon are seeking to pool resources through what would be the biggest merger in the aerospace and defense sectors.

United Technologies provides primarily commercial plane makers with equipment such as electronics and communications equipment, whereas Raytheon is a vendor mainly to the US government for equipment in military aircraft and missiles.

The deal would be structured as an all-stock merger of equals because United Technologies would separately spin off its Carrier air conditioning business and Otis elevator division, as it has previously announced it would do, the source said.

United Technologies has a market capitalization of US$114 billion, but without Carrier and Otis, its value could be less than US$60 billion, bringing it closer to Raytheon’s market capitalization of US$52 billion.

The Wall Street Journal first reported on the potential deal, stating that United Technologies Chief Executive Greg Hayes is expected to lead the newly created company, while Raytheon CEO Thomas Kennedy would be chairman.