Raytheon, a massive U.S. defense contractor best known for manufacturing the Patriot missile defense system, has agreed to merge with the parent company of Cedar Rapids-based Collins Aerospace, industrial technology giant United Technologies Corp., in an all-stock deal, the two companies announced Sunday.
The combined company — a merger of equals — would be the second-largest U.S. aerospace company, behind Boeing.
The newly formed company would be called Raytheon Technologies.
The companies said in a joint news release Sunday that Raytheon Technologies would consolidate into two business units — intelligence, space and airborne systems, and integrated defense and missile systems. Those new businesses would join Collins Aerospace and Pratt and Whitney to form the four business units of the new Raytheon Technologies.
Some 9,350 employees were reported for Collins Aerospace operations in 2018’s fourth quarter for Cedar Rapids, Coralville, Decorah, Bellevue and Manchester.
Collins Aerospace would see about $22 billion sales under Raytheon Technologies, according to a 2019 fact sheet from UTC and Raytheon.
It would not inherit UTC’s Carrier air-conditioner business or its Otis elevator company, both of which are being spun off under the terms of an earlier deal.
The merger is expected to be completed by the first half of 2020, subject to regulatory approvals. The new company would have its headquarters in the Boston area.
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In a phone interview Sunday evening, executives from both companies said the deal was driven by a desire to create a leading aerospace technology company using state-of-the-art hardware from the defense and commercial aviation industries.
The combined company would employ more than 60,000 engineers, would have about 38,000 active patents and would have enough financial firepower to invest $8 billion each year in research and development, they said.
“This is bringing two great technology companies together to provide technology solutions to our aerospace and defense customers that nobody else could ever provide,” said UTC CEO Greg Hayes, who would lead the combined company as chairman and CEO in two years, ina statement.
He added that the combination “is not about cost takeout or job loss in the U.S.,” noting that the company expects to hire about 20,000 people in the next year.
Raytheon CEO Thomas Kennedy, who would become chairman of the new company, said that, “Technology is a foundation for the entire company, and then upon that we build a commercial business and a defense business.”
The company likely would compete for the U.S. Defense Department’s emerging hypersonic missiles programs, in which its rival Lockheed Martin appears to have taken an early lead.
UTC purchased the former Rockwell Collins in late November for $30 billion including debt. It combined Rockwell with UTC Aerospace Systems to form Collins Aerospace.
Two units — avionics and mission systems — are based in Cedar Rapids.
Raytheon Technologies would continue to pursue contracts in military cybersecurity, Kennedy said, building on about 16 acquisitions the company has carried out in recent decades.
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It also would give Raytheon a sizable foothold in the commercial aerospace market for the first time in recent memory.
Most of Raytheon’s revenue comes from the Pentagon and U.S. intelligence agencies. After the merger, about half of its revenue would come from supplying parts and components to the commercial aviation market.
Pratt and Whitney, which operates as a subsidiary of UTC, builds the engines that power Airbus’ A220, and A320neo and A380 commercial jets. It is a dominant provider of military jet engines, building the supersonic jet engines that power F-15, F-16 and F-35 fighter jets.