M&A

UTC moves forward on pre-Raytheon merger agenda

United Technologies Corp. has signaled that it is getting closer to closing the megamerger of its aerospace-and-defense businesses with Raytheon and marking the end of an era for the former.

During UTC’s fourth quarter earnings call Tuesday, CEO Greg Hayes told investors the company is now eyeing early April for completing three transactions concurrently: the deal to create what will be Raytheon Technologies, and the spinoffs of the Otis and Carrier businesses into independent companies.

Hayes said those separations are “substantially complete from an operational standpoint” as of Jan. 1, when UTC “cut them (Otis and Carrier) off from the corporate systems for the most part.”

In the midst of all that, UTC is selling the Collins Aerospace military GPS business to BAE Systems’ U.S. subsidiary in order to get regulatory approval for the merger with Raytheon, which also is divesting an airborne radio business to BAE.

The GPS divestiture "will close sometime, we think, in the back half of the year,” Hayes told analysts. Antitrust regulators directed UTC and Raytheon to make the respective divestitures pre-condition for the merger to proceed -- a common trend regarding mergers between large defense hardware companies.

UTC is separately eyeing the sale of a military and space optics business that “we’ll probably sign in the next couple of months and that will also close in the back half of the year.”

Those divestitures may not be the only ones.

"When we complete the merger with Raytheon, we're going to have a fairly substantial portfolio, and as we typically would do at UTC, we're going to take a look at that portfolio," Hayes said. "Quite frankly, some of it is investable and some of it probably is not."

"We'll take the first year... go through the portfolio on both sides of the business. There will be places where we might elect not to invest and to cash out, and other places where we might want to double down."

UTC did not give detailed financial guidance for the year and will wait to do so after the Raytheon deal closes. Hayes said the future Raytheon Technologies company is eyeing May to give a first glimpse at its financial picture and expectations.

This morning’s conference call was also UTC’s last quarterly conversation with investors to discuss the company’s financial health and overall outlook.

“While 2020 marks the last chapter of United Technologies as it stands today, it also begins a bright future for Otis, Carrier and Raytheon Technologies as stand-alone public companies,” Hayes said.

About the Author

Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at rwilkers@washingtontechnology.com. Follow him on Twitter: @rosswilkers. Also find and connect with him on LinkedIn.

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