WALTHAM, Mass. and FARMINGTON, Conn., June
9, 2019 /PRNewswire/ -- Raytheon Company (NYSE: RTN) and
United Technologies Corp. (NYSE: UTX) have entered into an
agreement to combine in an all-stock merger of equals. The
transaction will create a premier systems provider with advanced
technologies to address rapidly growing segments within aerospace
and defense. The merger of Raytheon, a leading defense company, and
United Technologies, a leading aerospace company, comprised of
Collins Aerospace and Pratt & Whitney, will offer a
complementary portfolio of platform-agnostic aerospace and defense
technologies. The combined company, which will be named Raytheon
Technologies Corporation, will offer expanded technology and
R&D capabilities to deliver innovative and cost-effective
solutions aligned with customer priorities and the national defense
strategies of the U.S. and its allies and friends. The combination
excludes Otis and Carrier, which
are expected to be separated from United Technologies in the first
half of 2020 as previously announced.
The combined company will have approximately $74 billion in pro forma 2019 sales. With a
strong balance sheet and robust cash generation, Raytheon
Technologies will enjoy enhanced resources and financial
flexibility to support significant R&D and capital investment
through business cycles.
Under the terms of the agreement, which was unanimously approved
by the Boards of Directors of both companies, Raytheon shareowners
will receive 2.3348 shares in the combined company for each
Raytheon share. Upon completion of the merger, United Technologies
shareowners will own approximately 57 percent and Raytheon
shareowners will own approximately 43 percent of the combined
company on a fully diluted basis. The merger is expected to close
in the first half of 2020, following completion by United
Technologies of the previously announced separation of its
Otis and Carrier businesses. The
timing of the separation of Otis
and Carrier is not expected to be affected by the proposed merger
and remains on track for completion in the first half of 2020. The
merger is intended to qualify as a tax-free reorganization for U.S.
federal income tax purposes.
"Today is an exciting and transformational day for our
companies, and one that brings with it tremendous opportunity for
our future success. Raytheon Technologies will continue a legacy of
innovation with an expanded aerospace and defense portfolio
supported by the world's most dedicated workforce," said
Tom Kennedy, Raytheon Chairman and
CEO. "With our enhanced capabilities, we will deliver value to our
customers by anticipating and addressing their most complex
challenges, while delivering significant value to shareowners."
"The combination of United Technologies and Raytheon will define
the future of aerospace and defense," said Greg Hayes, United Technologies Chairman and
CEO. "Our two companies have iconic brands that share a long
history of innovation, customer focus and proven execution. By
joining forces, we will have unsurpassed technology and expanded
R&D capabilities that will allow us to invest through business
cycles and address our customers' highest priorities. Merging our
portfolios will also deliver cost and revenue synergies that will
create long-term value for our customers and shareowners."
Combination to Create Long-Term Value
- Balanced and diversified aerospace and defense portfolio that
is resilient across business cycles: The merger establishes a broad
and complementary portfolio of platform-agnostic capabilities
across the high-growth segments of aerospace and defense, reducing
risk of concentration in any individual platform or program.
- Highly complementary technology and R&D platform: With a
combined annual company and customer funded R&D spend of
approximately $8 billion, seven
technology Centers of Excellence, and over 60,000 engineers, the
company will develop new, critical technologies faster and more
efficiently than ever before. Areas of joint advancement include,
but are not limited to: hypersonics and future missile systems;
directed energy weapons; intelligence, surveillance, and
reconnaissance (ISR) in contested environments; cyber protection
for connected aircraft; next generation connected airspace; and
advanced analytics and artificial intelligence for commercial
aviation.
- Attractive financial profile with strong cash flow generation
and balance sheet: Robust free cash flow growth and a strong
balance sheet will support continued investment and return of
capital to shareowners. The combined company expects to return
$18 to $20
billion of capital to shareowners in the first 36 months
following completion of the merger. As a result of the combination,
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. In addition, the combination presents significant
long-term revenue opportunities from technology synergies.
- Complementary company culture: The combined company will have a
strong performance-based culture focused on integrity,
collaboration, innovation, diversity and corporate social
responsibility. Employees will have expanded opportunities for
career development and advancement in high-growth areas, as well as
ongoing engagement in local communities.
Pro Forma Business Structure
Raytheon plans to consolidate its four businesses into two
businesses to be named Intelligence, Space & Airborne Systems
and Integrated Defense & Missile Systems. The new businesses
will join Collins Aerospace and Pratt & Whitney to form the
four businesses of Raytheon Technologies.
Pro Forma Capital Structure
Net debt for the combined company at the time of closing is
expected to be approximately $26
billion, with United Technologies expected to contribute
approximately $24 billion. The
combined company targets an 'A' category credit rating at the time
of the closing.
Leadership and Governance
The combined company's Board of Directors will be comprised of
15 members, consisting of 8 directors from United Technologies and
7 from Raytheon, with the lead director from Raytheon. Tom Kennedy will be appointed Executive Chairman
and Greg Hayes will be named CEO of
Raytheon Technologies. Two years following the close of the
transaction, Hayes will assume the role of Chairman and
CEO.
Raytheon Technologies will be headquartered in the greater
Boston metro area, and will retain
a corporate presence in existing locations. The company will be led
by a highly experienced, proven leadership team with a strong track
record of innovation, delivering on synergies, and meeting
financial and customer commitments.
Timing and Closing
The transaction is subject to the satisfaction of customary
closing conditions, including receipt of required regulatory
approvals, the approval of Raytheon and United Technologies
shareowners, as well as completion by United Technologies of the
separation of its Otis and Carrier
businesses. As previously mentioned, the transaction is
expected to close in the first half of 2020.
2019 Financial Outlook
There is no change to either Raytheon's or United Technologies'
financial outlook for 2019.
Advisors
Citigroup Global Markets Inc. is acting as financial advisor to
Raytheon, and RBC Capital Markets LLC provided a fairness opinion.
Shearman & Sterling LLP is serving as legal advisor to
Raytheon. Morgan Stanley & Co. LLC, Evercore, and Goldman Sachs
& Co. LLC are acting as financial advisors to United
Technologies. Wachtell, Lipton, Rosen & Katz is serving as
legal advisor to United Technologies.
Conference Call
A conference call to discuss the merger will be held tomorrow,
June 10, 2019 at 8:00 a.m. EDT. Participants will include
Tom Kennedy, Chairman and CEO of
Raytheon; Greg Hayes, Chairman and
CEO of United Technologies; Toby
O'Brien, vice president and Chief Financial Officer of
Raytheon; and Akhil Johri, executive
vice president and Chief Financial Officer of United
Technologies.
The dial-in number for the conference call will be (877)
280-7280. The conference call will also be audiocast online at
www.raytheon.com/ir and www.utc.com. Individuals may listen to the
call and download charts that will be used during the call. These
charts will be available prior to the call. Interested parties are
encouraged to check the website ahead of time to ensure their
computers are configured for the audio stream.
Transaction Website
Additional information on the merger and related materials can
be found on a joint transaction website at
www.futureofaerospacedefense.com.
About Raytheon
Raytheon Company is a technology and innovation leader
specializing in defense, civil government and cybersecurity
solutions. With a history of innovation, Raytheon provides
state-of-the-art electronics, mission systems integration,
C5I® products and services, sensing, effects and mission
support for customers in more than 80 countries. Raytheon is
headquartered in Waltham,
Massachusetts. Follow us on Twitter.
About United Technologies
United Technologies Corp., based in Farmington, Connecticut, provides high
technology products and services to the building and aerospace
industries. By combining a passion for science with precision
engineering, the company is creating smart, sustainable solutions
the world needs. For more information about the company, visit our
website at www.utc.com or on Twitter @UTC.
Raytheon
Contacts
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Media
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Corinne
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781.522.5899
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Kelsey
DeBriyn
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781.522.5141
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United
Technologies Contacts
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Sherman
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917.373.6465
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Carroll
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860.728.7575
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Cautionary Statement
This communication contains statements which, to the extent they
are not statements of historical or present fact, constitute
"forward-looking statements" under the securities laws. From time
to time, oral or written forward-looking statements may also be
included in other information released to the public. These
forward-looking statements are intended to provide Raytheon
Company's and United Technologies' respective management's current
expectations or plans for our future operating and financial
performance, based on assumptions currently believed to be valid.
Forward-looking statements can be identified by the use of words
such as "believe," "expect," "expectations," "plans," "strategy,"
"prospects," "estimate," "project," "target," "anticipate," "will,"
"should," "see," "guidance," "outlook," "confident," "on track" and
other words of similar meaning. Forward-looking statements may
include, among other things, statements relating to future sales,
earnings, cash flow, results of operations, uses of cash, share
repurchases, tax rates, R&D spend, other measures of financial
performance, potential future plans, strategies or transactions,
credit ratings and net indebtedness, other anticipated benefits of
the proposed merger or the spin-offs by United Technologies of
Otis and Carrier into separate
independent companies (the "separation transactions"), including
estimated synergies and customer cost savings resulting from the
proposed merger, the expected timing of completion of the proposed
merger and the separation transactions, estimated costs associated
with such transactions and other statements that are not historical
facts. All forward-looking statements involve risks, uncertainties
and other factors that may cause actual results to differ
materially from those expressed or implied in the forward-looking
statements. For those statements, we claim the protection of the
safe harbor for forward-looking statements contained in the U.S.
Private Securities Litigation Reform Act of 1995. Such risks,
uncertainties and other factors include, without limitation: (1)
the effect of economic conditions in the industries and markets in
which United Technologies and Raytheon Company operate in the U.S.
and globally and any changes therein, including financial market
conditions, fluctuations in commodity prices, interest rates and
foreign currency exchange rates, levels of end market demand in
construction and in both the commercial and defense segments of the
aerospace industry, levels of air travel, financial condition of
commercial airlines, the impact of weather conditions and natural
disasters, the financial condition of our customers and suppliers,
and the risks associated with U.S. government sales (including
changes or shifts in defense spending due to budgetary constraints,
spending cuts resulting from sequestration, a government shutdown,
or otherwise, and uncertain funding of programs); (2) challenges in
the development, production, delivery, support, performance and
realization of the anticipated benefits (including our expected
returns under customer contracts) of advanced technologies and new
products and services; (3) the scope, nature, impact or timing of
the proposed merger and the separation transactions and other
merger, acquisition and divestiture activity, including among other
things the integration of or with other businesses and realization
of synergies and opportunities for growth and innovation and
incurrence of related costs and expenses; (4) future levels of
indebtedness, including indebtedness that may be incurred in
connection with the proposed merger and the separation
transactions, and capital spending and research and development
spending; (5) future availability of credit and factors that may
affect such availability, including credit market conditions and
our capital structure; (6) the timing and scope of future
repurchases by the companies of their respective common stock,
which may be suspended at any time due to various factors,
including market conditions and the level of other investing
activities and uses of cash, including in connection with the
proposed merger; (7) delays and disruption in delivery of materials
and services from suppliers; (8) company and customer-directed cost
reduction efforts and restructuring costs and savings and other
consequences thereof (including the potential termination of U.S.
government contracts and performance under undefinitized contract
awards and the potential inability to recover termination costs);
(9) new business and investment opportunities; (10) the ability to
realize the intended benefits of organizational changes; (11) the
anticipated benefits of diversification and balance of operations
across product lines, regions and industries; (12) the outcome of
legal proceedings, investigations and other contingencies; (13)
pension plan assumptions and future contributions; (14) the impact
of the negotiation of collective bargaining agreements and labor
disputes; (15) the effect of changes in political conditions in the
U.S. and other countries in which United Technologies, Raytheon
Company and the businesses of each operate, including the effect of
changes in U.S. trade policies or the U.K.'s pending withdrawal
from the European Union, on general market conditions, global trade
policies and currency exchange rates in the near term and beyond;
(16) the effect of changes in tax (including U.S. tax reform
enacted on December 22, 2017, which
is commonly referred to as the Tax Cuts and Jobs Act of 2017),
environmental, regulatory and other laws and regulations
(including, among other things, export and import requirements such
as the International Traffic in Arms Regulations and the Export
Administration Regulations, anti-bribery and anti-corruption
requirements, including the Foreign Corrupt Practices Act,
industrial cooperation agreement obligations, and procurement and
other regulations) in the U.S. and other countries in which United
Technologies, Raytheon Company and the businesses of each operate;
(17) negative effects of the announcement or pendency of the
proposed merger or the separation transactions on the market price
of United Technologies' and/or Raytheon Company's respective common
stock and/or on their respective financial performance; (18) the
ability of the parties to receive the required regulatory approvals
for the proposed merger (and the risk that such approvals may
result in the imposition of conditions that could adversely affect
the combined company or the expected benefits of the transaction)
and approvals of United Technologies' shareowners and Raytheon
Company's shareholders and to satisfy the other conditions to the
closing of the merger on a timely basis or at all; (19) the
occurrence of events that may give rise to a right of one or both
of the parties to terminate the merger agreement; (20) risks
relating to the value of the United Technologies' shares to be
issued in the proposed merger, significant transaction costs and/or
unknown liabilities; (21) the possibility that the anticipated
benefits from the proposed merger cannot be realized in full or at
all or may take longer to realize than expected, including risks
associated with third party contracts containing consent and/or
other provisions that may be triggered by the proposed transaction;
(22) risks associated with transaction-related litigation; (23) the
possibility that costs or difficulties related to the integration
of United Technologies' and Raytheon Company's operations will be
greater than expected; (24) risks relating to completed merger,
acquisition and divestiture activity, including United
Technologies' integration of Rockwell Collins, including the risk
that the integration may be more difficult, time-consuming or
costly than expected or may not result in the achievement of
estimated synergies within the contemplated time frame or at all;
(25) the ability of each of Raytheon Company, United Technologies,
the companies resulting from the separation transactions and the
combined company to retain and hire key personnel; (26) the
expected benefits and timing of the separation transactions, and
the risk that conditions to the separation transactions will not be
satisfied and/or that the separation transactions will not be
completed within the expected time frame, on the expected terms or
at all; (27) the intended qualification of (i) the merger as a
tax-free reorganization and (ii) the separation transactions as
tax-free to United Technologies and United Technologies'
shareowners, in each case, for U.S. federal income tax purposes;
(28) the possibility that any opinions, consents, approvals or
rulings required in connection with the separation transactions
will not be received or obtained within the expected time frame, on
the expected terms or at all; (29) expected financing transactions
undertaken in connection with the proposed merger and the
separation transactions and risks associated with additional
indebtedness; (30) the risk that dissynergy costs, costs of
restructuring transactions and other costs incurred in connection
with the separation transactions will exceed United Technologies'
estimates; and (31) the impact of the proposed merger and the
separation transactions on the respective businesses of Raytheon
Company and United Technologies and the risk that the separation
transactions may be more difficult, time-consuming or costly than
expected, including the impact on United Technologies' resources,
systems, procedures and controls, diversion of its management's
attention and the impact on relationships with customers,
suppliers, employees and other business counterparties. There can
be no assurance that the proposed merger, the separation
transactions or any other transaction described above will in fact
be consummated in the manner described or at all. For additional
information on identifying factors that may cause actual results to
vary materially from those stated in forward-looking statements,
see the reports of United Technologies and Raytheon Company on
Forms 10-K, 10-Q and 8-K filed with or furnished to the Securities
and Exchange Commission (the "SEC") from time to time. Any
forward-looking statement speaks only as of the date on which it is
made, and United Technologies and Raytheon Company assume no
obligation to update or revise such statement, whether as a result
of new information, future events or otherwise, except as required
by applicable law.
Additional Information
In connection with the proposed merger, United Technologies will
file a registration statement on Form S-4, which will include a
document that serves as a prospectus of United Technologies and a
joint proxy statement of United Technologies and Raytheon Company
(the "joint proxy statement/prospectus"), and each party will file
other documents regarding the proposed merger with the SEC. In
addition, in connection with the separation transactions,
subsidiaries of United Technologies will file registration
statements on Form 10 or S-1. INVESTORS AND SECURITY HOLDERS ARE
URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER
RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. A definitive joint
proxy statement/prospectus will be sent to United Technologies'
shareowners and Raytheon Company's shareholders. Investors and
security holders will be able to obtain the registration statements
and the joint proxy statement/prospectus free of charge from the
SEC's website or from United Technologies or Raytheon Company. The
documents filed by United Technologies with the SEC may be obtained
free of charge at United Technologies' website at www.utc.com or at
the SEC's website at www.sec.gov. These documents may also be
obtained free of charge from United Technologies by requesting them
by mail at UTC Corporate Secretary, 10 Farm Springs Road,
Farmington, CT, 06032, by
telephone at 1-860-728-7870 or by email at corpsec@corphq.utc.com.
The documents filed by Raytheon Company with the SEC may be
obtained free of charge at Raytheon Company's website at
www.raytheon.com or at the SEC's website at www.sec.gov. These
documents may also be obtained free of charge from Raytheon Company
by requesting them by mail at Raytheon Company, Investor Relations,
870 Winter Street, Waltham, MA,
02541, by telephone at 1-781-522-5123 or by email at
invest@raytheon.com.
Participants in the Solicitation
United Technologies and Raytheon Company and their respective
directors and executive officers and other members of management
and employees may be deemed to be participants in the solicitation
of proxies in respect of the proposed merger. Information about
United Technologies' directors and executive officers is available
in United Technologies' proxy statement dated March 18, 2019, for its 2019 Annual Meeting of
Shareowners. Information about Raytheon Company's directors and
executive officers is available in Raytheon Company's proxy
statement dated April 16, 2019, for
its 2019 Annual Meeting of Shareholders. Other information
regarding the participants in the proxy solicitation and a
description of their direct and indirect interests, by security
holdings or otherwise, will be contained in the joint proxy
statement/prospectus and other relevant materials to be filed with
the SEC regarding the transaction when they become available.
Investors should read the joint proxy statement/prospectus
carefully when it becomes available before making any voting or
investment decisions. You may obtain free copies of these documents
from United Technologies or Raytheon Company as indicated
above.
No Offer or Solicitation
This communication shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended.
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SOURCE Raytheon Company and United Technologies Corp.