The United Technologies Corp.’s megadeal offer for Raytheon Co. gained approval Friday from the European Commission, one of two key anti-trust regulatory steps.
UTC has about 1,500 employees with its Collins Aerospace division in Winston-Salem.
UTC’s proposed purchase of the defense-industry giant, announced June 9, would form a company valued at $128.8 billion. UTC shareholders would own 57% of what would be called Raytheon Technologies Corp.
The approval is conditional on the divestiture of certain assets that the companies announced Jan. 21.
BAE Systems PLC, a military-technology company based in the United Kingdom, plans to buy UTC division Collins Aerospace’s Military Global Positioning System business for $1.92 billion in cash. The business is based in Cedar Rapids, Iowa, and has 675 employees.
BAE also plans to buy Raytheon’s Airborne Tactical Radios business for $275 million. The unit is based in Fort Wayne, Ind., with 100 employees.
The companies still need U.S. Justice Department anti-trust approvals, which is likely to occur since the commission and U.S. Justice officials cooperate in their investigations.
Anti-trust approvals are required because both companies are global suppliers of military systems and equipment to aircraft and guided munition producers, as well as armed forces.
The commission initially had concerns that the transaction as proposed “would have reduced competition in the markets for military GPS receivers and airborne radios.”
On those issues, the commission determined a combined company “would have neither the ability nor the incentives to restrict competitors’ access to essential input or to a sufficient customer base.”
The commission also investigated whether the merged entity could use systems or components in its portfolio to shut out competitors, through practices such as bundling. It also determined that the combined company “would have neither the ability nor the incentives to engage in such strategies and harm competition.”
“The proposed remedies remove the entire horizontal overlap between UTC and Raytheon in both military GPS receivers and military airborne radios globally,” the commission said.
The megadeal took another big step forward Wednesday when UTC’s board of directors approved the spinoffs of its Carrier and Otis divisions. The spinoffs, projected to take effect at 5 p.m. April 3, were a requirement before the UTC-Raytheon deal could be completed.
The planned merger would combine UTC’s Collins Aerospace and Pratt & Whitney businesses with Raytheon’s Intelligence, Space & Airborne Systems and Integrated Defense & Missile Systems.
“Our goal,” Greg Hayes, UTC’s chairman and chief executive, said, “continues to be to have the merger ready to close concurrent with the portfolio separation.” Hayes would remain chairman and CEO of a combined UTC-Raytheon
The goal is to commence regular trading of Carrier Global Corp.’s and Otis Worldwide Corp.’s stock on April 3, both on the New York Stock Exchange.
UTC said it would wait until the Raytheon acquisition is completed before providing fiscal 2020 guidance on sales and adjusted earnings.
It has projected Collins Aerospace’s sales being down by single digits compared with a year ago, in particular because of the suspension of Boeing 737 MAX production amid safety issues with the aircraft, as well as the loss of revenue from selling off assets to gain global regulatory approvals for the Raytheon deal.