The European Commission has approved United Technologies Corporation (UTC)’s buyout of Raytheon, on the condition that the firm divests its GPS and airborne systems.
Both Raytheon and UTC are defence and aerospace technology companies based in the US. The combined companies will form a new entity called Raytheon Technologies Corporation worth over $120 billion. The newly formed firm will employ more than 60,000 engineers, with an annual development budget of circa £6.5 billion ($8 billion).
The deal had been first announced in June 2019.
The Commission said it had concerns that “UTC and Raytheon are two of the very few suppliers of the core military GPS technology worldwide, thus including in the EEA, which in turn constitutes a critical input for a broad range of military systems.”
It added: “The merged entity would have faced very limited competition from alternative suppliers following the transaction.”
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To meet the Commission’s concerns, UTC has agreed to sell its “entire military GPS receiver and anti-jamming business and Raytheon its “entire military airborne radios business to BAE Systems, the UK-based defence and aerospace company.
The proposed remedies remove the entire horizontal overlap between UTC and Raytheon in both military GPS receivers and military airborne radios globally.
The EU found that the resulting merged entity” would have neither the ability nor the incentives to restrict competitors’ access to essential input or to a sufficient customer base.”
Greg Hayes CEO of United Technologies commented that: “The combination of United Technologies and Raytheon will define the future of aerospace and defense. Our two companies have iconic brands that share a long history of innovation, customer focus and proven execution.
“By joining forces, we will have unsurpassed technology and expanded R&D capabilities that will allow us to invest through business cycles and address our customers’ highest priorities. Merging our portfolios will also deliver cost and revenue synergies that will create long-term value for our customers and shareowners.”
Tom Kennedy CEO of Raytheon commented that: “Raytheon Technologies will continue a legacy of innovation with an expanded aerospace and defense portfolio supported by the world’s most dedicated workforce. With our enhanced capabilities, we will deliver value to our customers by anticipating and addressing their most complex challenges, while delivering significant value to shareowners.”
The EC was first told of the deal on January 24. It cleared the merger within under eight weeks, signing off the deal on March 13.