Trump Questions Whether UTC-Raytheon Deal Hurts Competition
(Bloomberg) -- President Donald Trump questioned the impact on competition of United Technologies Corp.’s proposed purchase of Raytheon Co., which would form an aerospace and defense giant with $74 billion in sales in one of the industry’s biggest transactions ever.
“When I hear they’re merging, does that take away more competition?” Trump said in a Monday interview on CNBC. “It’s hard to negotiate when you have two companies and sometimes only one bid.”
When pressed on whether U.S. regulators would seek to block the deal, Trump talked about the potential for overlap in products sold by the companies. "Only if they have the same products, that would be the thing that bothers me most," he said. “They have some overlap as I understand.”
United Technologies agreed to buy Raytheon in an all-stock deal, forming an aerospace and defense giant in one of the industry’s biggest transactions ever.
Greg Hayes, chairman and chief executive officer of United Technologies, said he planned to talk to Trump later Monday.
“Once he understand the benefits of this merger in terms of what it’s going to do to reduce costs to the government, what it’s going to do to improve the technology of the United States, our defense profile, what it’s going to do for jobs in this country, I think he’s going to be supportive as he has been for both of our companies over his administration,” Hayes said on CNBC.
The new entity will be called Raytheon Technologies Corp. when the deal closes in the first half of 2020, after United Technologies completes the separation of its Otis elevator and Carrier air-conditioner businesses, the companies said in a statement Sunday. While billed as a merger of equals, current United Technologies shareholders will own most of the combined company, which is expected to be worth well over $100 billion, according to Bloomberg Intelligence.
Hayes drew fire from Trump during the 2016 campaign because of the CEO’s decision to close a gas-furnace plant in Indiana and move production to Mexico. Under pressure from Trump, United Technologies backtracked on the plan following the election. The move had garnered national attention during the campaign after a worker’s mobile-phone video of the announcement to employees took off on social media.
Analyst Byron Callan of Capital Alpha Partners wrote in a note Sunday that the Justice Department may require small divestitures where there’s overlap between United Technologies and Raytheon.
“We don’t expect DoD to raise strong objections to the deal,” Callan wrote.
Trump on Monday said competition already has been diminished among defense contractors.
“It becomes one big, fat beautiful company, but I have to negotiate -- meaning the United States has to buy things,” Trump said. “Does that make it less competitive? It’s already non-competitive.”
©2019 Bloomberg L.P.