M&A

Antitrust regulators seek more Raytheon-UTC megadeal info

Antitrust regulators have asked United Technologies Corp. for more information about the planned merger of its aerospace and defense businesses with Raytheon.

In a regulatory filing posted Thursday, UTC said it received the request for additional information and documents from the Justice Department’s antitrust division on July 22. Both UTC and Raytheon filed on June 21 their respective notification forms to DOJ and the Federal Trade Commission as required by the so-called “Hart Scott Rodino Act” that amended antitrust laws in 1976.

Companies can continue on due diligence and post-merger integration planning but cannot proceed on closing any transaction while they wait for regulators to review a deal.

This second request by DOJ was expected and has precedent from prior transactions involving large defense companies. DOJ made similar requests to L3 Technologies and Harris Corp. regarding their merger that closed in June of this year, plus to Northrop Grumman regarding that company’s acquisition of Orbital ATK that completed in June 2018.

Harris was required to divest a night vision technology businesses before it could close the deal with L3, while Northrop had to firewall Orbital’s solid rocket motor business from the rest of the corporation for that deal to proceed.

The creation of what is now “L3 Harris” took nearly eight months to complete from announcement, while Northrop’s deal for Orbital required nine months.

Contrast the much less amount of time regulators have taken to review major deals involving technology and professional services companies, who operate in a much more fragmented area of the government market than defense hardware companies.

General Dynamics received clearance for its deal to buy CSRA within one month post-announcement, as was Science Applications International Corp. for its acquisition of Engility. The GD-CSRA deal closed in April of last year and SAIC-Engility completed in January of this year.

Last year's complex merger to create Perspecta was cleared in three months after that deal was announced, and Leidos saw its 2016 combination with the former Lockheed Martin IT services segment signed off on two months after disclosure.

Perspecta’s creation and the Leidos-Lockheed transaction took eight and seven months to close respectively, but those prolonged timeframes can also be attributed to the complicated “Reverse Morris Trust” structure of both deals.

Neither of those four deals saw antitrust regulators make a second request for information.

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