Raytheon and United Technologies are in late-stage talks to merge in an all-stock deal

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United Technologies President and CEO Gregory Hayes

Richard Drew | AP

Raytheon and United Technologies‘ large aerospace business are in late-stage talks to combine in a all-stock deal that would boost consolidation in the aviation and defense sectors, according to a source familiar with the matter.

The companies have a combined market value of nearly $166 billion.

The deal would give defense contractor Raytheon exposure to the booming commercial aerospace sector through the United Technologies’ unit, which makes everything from high-value jet engines and competes with General Electric, to cockpit controls, airplane seats and cabin interiors. That would diversify defense component supplier Raytheon and consolidate the aerospace and defense companies that supply giants like Airbus and Boeing.

United Technologies in November 2018 said it would spin off its Otis elevator business and its Carrier air conditioning business into separate companies. The remaining aerospace business would be combined with Raytheon, the person said. United Technologies CEO Gregory Hayes would become CEO of the combined company, which will be called Raytheon Technologies, and Raytheon’s CEO Thomas Kennedy would become chairman, according to the person.

The combined companies, after Carrier and Otis are separated out, are expected to have a combined market value of more than $100 billion, the person said.

The deal, a so-called merger of equals, would close in 2020, when United Technologies company expects to complete the separation of the elevator and air conditioning businesses, the person said. If completed United Technologies shareholders would own 53 percent of the new company and Raytheon’s would own 47 percent, the person added. 

The deal, which could still fall apart, could be announced as early as Monday, the source said. The deal was reported earlier by The Wall Street Journal.

RBC and Citigroup are advising Raytheon on the deal and Morgan Stanley and Evercore are working with United Technologies, according to the person.

The companies did not immediately return requests for comment.

This is breaking news. Please check back for updates.

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