Lockheed lands $13.6b deal for Sikorsky Aircraft
Lockheed Martin will acquire Black Hawk helicopter-maker Sikorsky Aircraft for US$9 billion ($13.6 billion) as it seeks greater access to the military and commercial helicopter market.
United Technologies last month said it planned to shed Sikorsky so that the aerospace and building systems conglomerate could better focus on high-technology systems for both of those industries.
Lockheed will add the world’s largest builder of military helicopters to its arsenal.
“One of the key elements of our strategic planning is to secure and extend our core defence business and we feel confident that the addition of Sikorsky will contribute significantly to the growth objective,” said Lockheed Martin chief executive Marillyn Hewson.
Sikorsky also makes presidential helicopters and its aircraft have returned astronauts home after they splashed down in the Pacific Ocean at the end of their space travels.
Lockheed Martin plans to add Sikorsky to its mission systems and training unit. The defence contractor expects to fund the acquisition with cash on hand and debt issuances.
Even though Lockheed is an industry leader it can improve Sikorsky, particularly on contracting, cash flow and in reviewing security needs of customers, said chief financial officer Bruce Tanner.
“We think it fits well into our portfolio and this is what we do,” Tanner said.
Lockheed Martin is now reviewing its options for its government information technology and technical services businesses, primarily in the Information Systems & Global Solutions business segment, and a portion of the Missiles and Fire Control business segment. They represent about US$6 billion in estimated 2015 annual sales.
United Technologies said it will use proceeds from the sale to buy back company stock.
Cowen and Co analyst Cai von Rumohr wrote that the proposed sale may be a “longer-term strategic plus” for United Technologies. There is the potential, however for a close review of the deal by the Defence Department, von Rumohr said.
It is a natural fit for Lockheed Martin, which is already the primary mission systems provider for Sikorsky’s MH-60 Naval Hawk, Canadian Maritime Helicopter, Combat Rescue Helicopter and presidential helicopter, von Rumohr said.
The deal is targeted to close by the end of the year or in the first quarter of 2016. Sikorsky accounted for US$7.45 billion of United Technologies’ US$65.1 billion in revenue last year.