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Assuming the market is now pricing Raytheon as being, de facto, a 43% stake in the new company, Raytheon's current market cap of $60.7 billion implies the market thinks Raytheon Technologies is worth around $141.1 billion. Raytheon and United Technologies plan to merge Kimberly Adams Jun 10, 2019 A company sign is posted at a Raytheon Co. campus on June 10, 2019 in El Segundo, California. The two firms said Raytheon Technologies will return $18-$20 billion of capital to shareholders in the first three years following completion of the merger. As you can see, the implied valuation for Raytheon Technologies suggests buying Raytheon stock is a good idea. United Technologies is big in commercial aviation. A Raytheon missile firing. Raytheon has a big defense contracting business. Moreover, United Technologies has a pretty good track record of integrating acquisitions, with the company exceeding its cost-savings targets for the Goodrich and Rockwell Collins deals.
Image source: Raytheon website. Over the weekend, defense contractor Raytheon and aerospace company United Technologies announced that they plan to merge. (For reference, EBITDA is earnings before interest, tax, depreciation and amortization.). A merger is an agreement that unites two existing companies into one new company. Therefore, the key difference in deciding whether to buy Raytheon or UTC stock comes down to the fact that if you buy Raytheon stock, you will end up owning 43% of Raytheon Technologies. I write about electrical equipment, transportation, and multi-industry industrial stocks. Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.

Synergy is the concept that the value and performance of two companies combined will be greater than the sum of the separate individual parts. Mergers and acquisitions (M&A) is a general term that refers to the consolidation of companies or assets through various types of financial transactions. We already know that the newly created company, Raytheon Technologies, will be 57% owned by United Technologies (UTC) shareholders and 43% by Raytheon. Engineer, investment manager and property developer. “They’re looking at it, in this acquisition, truly as a long-term view that this combined company will be able to ride the ups and downs of the markets,” said Doug Gates, head of aerospace and defense for KPMG. That consolidation worries President Trump. The new company, Raytheon Technologies Corporation, will be 57% owned by United Technologies shareholders and 43% owned by Raytheon shareholders. Blue collar workers physically making a better world. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. The merger will reduce risk of concentration and create "a broad and complementary portfolio of platform-agnostic capabilities.

First, United Technologies will spin off its elevator business, Otis, and, separately, its heating, ventilation, and air conditioning business, Carrier. Second, the remaining aviation business of United Technologies (namely Pratt & Whitney and Collins Aerospace) will be merged with Raytheon in order to create a new company called Raytheon Technologies with a new ticker, RTX. Data source: United Technologies SEC filings.

As you can see below, Raytheon Technologies is expected to grow EBITDA in the mid to high single digits in the next few years. Taking these figures for EBITDA and then applying the implied EV of $167.2 billion gives the following EV/EBITDA and EV/EBIT multiples for the new company. Marketplace is a division of MPR's 501 (c)(3). How long will habits established during the pandemic last? The net debt of the company at the time of closing is expected to be approximately $26 billion, with over 90% contributed by United Technologies.

A backflip takeover is a rare type of takeover in which the acquirer becomes a subsidiary of the company it purchased.

Therefore, the key difference in … Investopedia uses cookies to provide you with a great user experience. "Our two companies have iconic brands that share a long history of innovation, customer focus and proven execution. CW EV to EBITDA (Forward) data by YCharts. Defense companies, such as Lockheed Martin, Northrop Grumman, and General Dynamics tend to trade on 13 times EBITDA and 16 times EBIT, while commercial aviation-focused companies like TransDigm and France's Safran tend to trade on higher multiples. Donate today — in any amount — to become a Marketplace Investor.

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