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Raytheon and United Technologies are in late-stage talks to merge in an all-stock deal – CNBC

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United Technologies President and CEO Gregory Hayes

Richard Drew | AP

Raytheon is in late-state talks to combine with United Technologies‘ aerospace unit in an all-stock deal that would consolidate the aviation and defense sectors, according to a source familiar with the matter.

The companies have a combined market value of nearly $166 billion.

The deal, which could be announced as early as Monday morning, would combine United Technologies’ aerospace business and bring the two suppliers to giants like Airbus, Boeing and Lockheed Martin under one roof.

For Raytheon, the deal provides exposure to the booming commercial aerospace sector through the United Technologies’ unit, which makes everything from high-value jet engines and competes with General Electric, to cockpit controls, airplane seats and cabin interiors. United Technologies would gain footing in the cyber-security and defense sectors.

United Technologies in November 2018 announced it was spinning off its Otis elevator business and its Carrier air conditioning unit, into separate companies. The aerospace business would be combined with Raytheon, the person said. United Technologies CEO Gregory Hayes would become CEO of the combined company, which would be called Raytheon Technologies, and Raytheon’s CEO Thomas Kennedy would become chairman, according to the person.

The combined companies, after Carrier and Otis are separated out, are expected to have a combined market value of more than $100 billion, the person said.

The deal, a so-called merger of equals, would close before 2020, when United Technologies expects to complete the separation of the elevator and air conditioning businesses, the person said. If completed, United Technologies shareholders would own 53% of the new company and Raytheon’s would own 47%, the person added.

United Technologies would have eight board seats and Raytheon would have seven, said the source.

The deal, which could still fall apart, was reported earlier by The Wall Street Journal. Deal talks started several months ago, the source said.

The combined company would be headquartered in the Boston metropolitan area, the person said. Raytheon is based in Waltham, Mass., a Boston suburb.

RBC and Citigroup are advising Raytheon on the deal and Morgan Stanley and Evercore are working with United Technologies, according to the person.

The companies did not immediately respond to requests for comment.

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