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Raytheon's Shares Up on Merger Deal With United Technologies
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Raytheon Company recently inked an all-stock merger deal with multinational conglomerate United Technologies Corp . Considered to be the biggest merger in the U.S. aerospace and defense space, this deal will generate a conglomerate worth $121 billion (as per Reuters).
The combined company, to be named Raytheon Technologies Corporation, will have approximately $74 billion in pro forma 2019 sales. The deal, a tax-free one, is expected to close in the first half of 2020, following the completion of United Technologies’ earlier announced separation from its Otis and Carrier businesses.
Significance of the Deal
Per the terms of the latest agreement, Raytheon’s shareowners will receive 2.3348 shares in the combined company for each of this missile maker’s share. On completion of the merger, Raytheon’s shareowners will own approximately 43% of the combined company.
Following the completion of the deal, Raytheon’s shareholders can expect return of capital in the range of $18-$20 billion during the first three years. By the fourth year of the closure, the merger is projected to generate more than $1 billion of gross annual cost synergies.
Notably, the new company’s portfolio will comprise aerospace electronics, communications and other equipment from United Technologies along with Raytheon’s military aircraft and missile equipment. Post formation, Raytheon Technologies is certainly expected to acquire a significant position in the U.S. aerospace and defense space, by offering more cost-effective solutions backed by an expanded product portfolio.
Other Major Deals in the Same Space
Growing need for cost-reduction initiatives, intensifying competition and increased control over production procedures have lately prompted defense industry bigwigs to engage in frequent mergers and acquisitions. Moreover, the current U.S. administration has been increasing the defense budget over the past couple of years, which have all the more enticed defense biggies to strengthen their product portfolio through mergers. We believe these factors have also played a key role in Raytheon’s latest merger deal.
Regarding mergers, it is imperative to mention that last year we witnessed a handful of similar mega deals in the U.S. aerospace and defense space. In June 2018, Northrop Grumman (NOC - Free Report) completed the acquisition of Orbital ATK for $9.2 billion. Next, United Technologies completed the Rockwell Collins buyout for $30 billion in November 2018 to emerge as one of the world’s largest aircraft-equipment manufacturers. Such consolidations by leading industry players should improve economies of scale for the aerospace-defense equipment industry as a whole.
Price Performance
Following the latest merger deal, shares of Raytheon have gained 1.3% in the pre-market trading session. This reflects that news of this acquisition has received positive response from the market.
Zacks Rank & Key Pick
Raytheon currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Aerojet Rocketdyne Holdings, Inc. , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Aerojet Rocketdyne delivered average positive earnings surprise of 36.67% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has moved 18.4% up to $1.67 over the past 90 days.
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Raytheon's Shares Up on Merger Deal With United Technologies
Raytheon Company recently inked an all-stock merger deal with multinational conglomerate United Technologies Corp . Considered to be the biggest merger in the U.S. aerospace and defense space, this deal will generate a conglomerate worth $121 billion (as per Reuters).
The combined company, to be named Raytheon Technologies Corporation, will have approximately $74 billion in pro forma 2019 sales. The deal, a tax-free one, is expected to close in the first half of 2020, following the completion of United Technologies’ earlier announced separation from its Otis and Carrier businesses.
Significance of the Deal
Per the terms of the latest agreement, Raytheon’s shareowners will receive 2.3348 shares in the combined company for each of this missile maker’s share. On completion of the merger, Raytheon’s shareowners will own approximately 43% of the combined company.
Following the completion of the deal, Raytheon’s shareholders can expect return of capital in the range of $18-$20 billion during the first three years. By the fourth year of the closure, the merger is projected to generate more than $1 billion of gross annual cost synergies.
Notably, the new company’s portfolio will comprise aerospace electronics, communications and other equipment from United Technologies along with Raytheon’s military aircraft and missile equipment. Post formation, Raytheon Technologies is certainly expected to acquire a significant position in the U.S. aerospace and defense space, by offering more cost-effective solutions backed by an expanded product portfolio.
Other Major Deals in the Same Space
Growing need for cost-reduction initiatives, intensifying competition and increased control over production procedures have lately prompted defense industry bigwigs to engage in frequent mergers and acquisitions. Moreover, the current U.S. administration has been increasing the defense budget over the past couple of years, which have all the more enticed defense biggies to strengthen their product portfolio through mergers. We believe these factors have also played a key role in Raytheon’s latest merger deal.
Regarding mergers, it is imperative to mention that last year we witnessed a handful of similar mega deals in the U.S. aerospace and defense space. In June 2018, Northrop Grumman (NOC - Free Report) completed the acquisition of Orbital ATK for $9.2 billion. Next, United Technologies completed the Rockwell Collins buyout for $30 billion in November 2018 to emerge as one of the world’s largest aircraft-equipment manufacturers. Such consolidations by leading industry players should improve economies of scale for the aerospace-defense equipment industry as a whole.
Price Performance
Following the latest merger deal, shares of Raytheon have gained 1.3% in the pre-market trading session. This reflects that news of this acquisition has received positive response from the market.
Zacks Rank & Key Pick
Raytheon currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Aerojet Rocketdyne Holdings, Inc. , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Aerojet Rocketdyne delivered average positive earnings surprise of 36.67% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has moved 18.4% up to $1.67 over the past 90 days.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +98%, +119% and +164% in as little as 1 month. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>