Raytheon and United Technologies are merging in a deal that creates one of the world's largest defense companies. With combined sales of $74 billion, the merged company would be bigger than Lockheed Martin and Northrop Grumman.
The merger, announced Sunday, will close in the first half of 2020 after United Technologies completes the previously planned separation of its Otis and Carrier businesses.
Raytheon shareholders will receive 2.33 shares in the new company for each Raytheon share. Once the merger is complete, United Technologies shareholders will own approximately 57% of the company; Raytheon shareholders will own the rest.
The combined company, named Raytheon Technologies Corp., will be a powerhouse of defense research and technology. The companies said they will be able to develop new technologies more quickly with combined R&D spending of $8 billion annually and more than 60,000 engineers.
Raytheon Technologies will focus on hypersonics — vehicles or weapons which can fly faster than the speed of sound — as well as intelligence and surveillance systems, artificial intelligence for commercial aviation and cybersecurity for connected planes.
Waltham-based Raytheon was founded in 1922 and makes missiles — including the Patriot system — and cybersecurity tools. Connecticut-based United Technologies was founded in 1934 and makes products for the aerospace and building sectors, including airplane engines and spacesuits.
Eventually, the companies expect the merger will cut $1 billion in costs annually, half of which will be returned to customers.
"Our two companies have iconic brands that share a long history of innovation, customer focus and proven execution," said United Technologies Chairman and CEO Greg Hayes in a statement.
Hayes will become the CEO of Raytheon Technologies. Two years after the merger closes, he will add the title of chairman. Raytheon Chairman and CEO Tom Kennedy will be appointed executive chairman. The company's board will have eight directors from United Technologies and seven from Raytheon.
Raytheon Technologies will be based near Boston. That brought a complaint from U.S. Sen. Richard Blumenthal, a Democrat from Connecticut, who said he is troubled by the potential impact of the headquarters moving to Massachusetts. Blumenthal, a member of the Senate Armed Services Committee, also urged the Defense Department, the Justice Department and other agencies to examine the potential impact on costs and competition in the defense industry.
Defense mergers have been increasing as companies — flush with cash from the rising defense budget — look to ensure future growth. In 2018 there were eight mergers exceeding $1 billion in value, including an all-stock deal between L3 Technologies and Harris and General Dynamics' acquisition of CSRA Inc., according to PricewaterhouseCoopers.