United Technologies Corp., parent company of Cedar Rapids-based Collins Aerospace, is nearing a deal to merge its aerospace business with U.S. defense contractor Raytheon and form a new company worth well over $100 billion, a person familiar with the matter said on Saturday.
It was unclear how such a merger would affect Collins Aerospace operations, if at all.
If the negotiations between UTC and Raytheon are completed successfully, a deal could be announced as early as Monday, the source said, asking not to be identified because the matter is confidential.
A UTC spokeswoman declined to comment when reached by The Gazette Saturday evening.
Raytheon did not immediately respond to Reuters to a request for comment.
Through the merger, UTC and Raytheon, headquartered in Waltham, Mass., are seeking to pool resources serving the commercial and defense aerospace industries.
UTC, based in Farmington, Conn., provides commercial plane makers with equipment such as electronics and communications equipment. Raytheon is a vendor primarily to the U.S. government for equipment in military aircraft and missiles.
The deal would be structured as an all-stock merger of equals because UTC would separately spin off its Carrier air conditioning business and Otis elevator division, as it previously has announced it would do, the source said.
UTC has a market capitalization of $114 billion, but without Carrier and Otis, its value could be less than $60 billion, bringing it closer to Raytheon’s market capitalization of $52 billion.
The Wall Street Journal first reported on the potential deal on Saturday, stating that UTC Chief Executive Greg Hayes is expected to lead the newly created company, while Raytheon CEO Thomas Kennedy would be chairman.
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UTC has said it is on track to separate Carrier and Otis in the first half of 2020, leaving the company focused on its aerospace business through its acquisition of Rockwell Collins, which was completed in late November 2018, and the Pratt and Whitney engines business.
The deal with Raytheon could put pressure on General Electric, which also competes with UTC for commercial aerospace clients, to seek scale.
Raytheon, maker of the Tomahawk and the Patriot missile systems, and other U.S. weapons makers are expected to benefit from strong global demand for fighter jets and munitions as well as higher U.S. military spending in fiscal 2020.
However, the deal with UTC would allow Raytheon to expand into commercial aviation, which does not rely on government spending as does the defense sector.