United Technologies Corp.’s (UTC) historic combination with Raytheon Co. began to take shape about a year ago with a casual phone call.
UTC CEO Gregory Hayes had just recently announced the Farmington conglomerate was looking to spin off its Otis Elevators and Carrier divisions when he received a call from Raytheon CEO Thomas A. Kennedy.Â
Kennedy asked Hayes whether UTC would be interested in discussing a merger of equals between the two manufacturing behemoths with the intent of creating an aerospace and defense powerhouse.
Hayes was initially too busy working out the details of separating UTC into three independent public companies, but said he was interested in the shareholder value of the potential combination.
Raytheon was willing to wait.
“After you drop off Otis Elevator and you look at United Technologies, there is a platform agnostics company with great technology, great franchises, and a great future for franchise generation and also with a good position in the international market place,” Kennedy said in a conference call with investors on Monday morning. “It’s essentially like looking at Raytheon in the mirror to a certain degree.”
The chief executives revived merger talks in late 2018 after UTC announced its plans to spin off Otis, Carrier and its aerospace division, known as Collins Aerospace Systems, which includes newly acquired Rockwell Collins and UTC Aerospace Systems. East Hartford jet-engine maker Pratt & Whitney operates under UTC’s umbrella.Â
By January, UTC and Raytheon were deep into merger negotiations in what has led to one of the industry’s largest-ever deals. The proposed merger of equals is an all-stock deal that will create a company with annual revenues of about $74 billion, operating its corporate headquarters in the Boston area. That means Connecticut will lose another corporate headquarters once and if the deal receives necessary regulatory approvals.Â
UTC is currently based in Farmington and at least 100 jobs there will be relocated to the Boston area. The combined company will be named Raytheon Technologies Corp.
“This has been on our radar screen forever,” Hayes said Monday. “This is a huge benefit to UTC going forward in the fact that we aren’t going to have to set up a separate corporate office for the aerospace business post spin.”
“I’m not going to have to worry about setting this up on my own,” said Hayes. “I get the benefit of Raytheon’s great staff along with ours. I think this is going to be really fortuitous timing, which nobody could have predicted but clearly that is a huge benefit to us on top of the technology that Raytheon brings. We are going to pick the best of both worlds… .”
Hayes, who became UTC’s CEO in Nov. 2014, said the combined companies will achieve more than $1 billion in cost savings in the fourth year of their partnership.
He said he has little doubt they will be able to achieve that lofty estimate.
Hayes pointed to UTC’s early cost-cutting measures in conjunction with its $30 billion combination with Rockwell Collins, which has reaped more than $600 million in savings, far exceeding its initial goal of $500 million.
“We have a track record, we know how to do this,” he said.
Hayes on Monday attempted to quell concerns about UTC’s footprint in Connecticut.
He reiterated several times that the megadeal would only force a corporate office integration, claiming the companies are “not looking to consolidate a bunch of factories.”
UTC has indicated that nearly all of its 19,000 employees will remain in Connecticut, excluding about 100 moving to new headquarters in the Boston area.
“We are not taking out a lot of jobs,” he said. “In fact, we are going to create a lot of jobs through this merger.”
Hayes said the two companies plan on adding 10,000 jobs this year with continued overall employment growth in 2020 and beyond.Â
In 2019, UTC has hired 5,5000 new workers and is on track to create more than 10,000 jobs in the year, he said.
“Raytheon will maintain a strong presence in Connecticut for years to come,” Hayes said.
This story has been updated
