Merger to cost state its largest HQ
UTC-Raytheon deal announced
United Technologies Corp. and Raytheon Co. announced a “merger of equals” Sunday in which UTC, Connecticut’s largest private employer, will no longer be based in the state it has called home since it was founded in 1929.
The merger would be a stock swap, meaning it would be a tax-free combination rather than a sale of one company to the other, according to a press release issued by UTC late Sunday.
The new company, known as Raytheon Technologies, would be based in the Boston metro area, at or near Raytheon’s current headquarters in Waltham, Mass.
Greg Hayes, chief executive of Farmington-based UTC, would be chief executive of the combined company. Raytheon CEO Thomas Kennedy would be executive chairman.
The loss of a headquarters will cost Connecticut several hundred jobs, many of them high-paying,
along with the professional services, philanthropy, and prestige that goes with it. The good news for Connecticut is that few of UTC’s 17,000 operations jobs would be likely to disappear as a result of the merger. That is because UTC and Raytheon, although both giant aerospace suppliers, have very little overlap.
UTC is currently much larger than Raytheon, but UTC announced last year it will spin off its Otis Elevator and its building systems businesses, the latter including Carrier air conditioning and a long list of other security, fire protection and indoor climate-control units. Those two spinoffs, forming separate companies, would still happen and the UTC-Raytheon deal would combine UTC’s aerospace businesses into a new company.
In the new company, expected to be worth more than $100 billion, the UTC businesses would be somewhat larger than Raytheon. The company would be called Raytheon Technologies and would have eight board members from UTC and seven from Raytheon.
The merger would take place in 2020 and is subject to several government approvals, which can’t be taken for granted because Raytheon Technologies would be one of the last remaining giant defense contractors.
UTC is the largest private, for-profit employer in the state. Among all private employers, the Yale New Haven Health System may be larger but it’s nonprofit and is regulated as separate hospitals.
A spokeswoman for Gov. Ned Lamont said the governor’s office did not have an immediate comment.
All mergers come with soaring language about a match made in heaven, although most fail.
“The combination of United Technologies and Raytheon will define the future of aerospace and defense,” said Hayes in the press release. “Our two companies have iconic brands that share a long history of innovation, customer focus and proven execution. By joining forces, we will have unsurpassed technology and expanded R&D capabilities that will allow us to invest through business cycles and address our customers’ highest priorities. Merging our portfolios will also deliver cost and revenue synergies that will create long-term value for our customers and shareowners.”
This time around the company could consolidate its head office at the Raytheon base or elsewhere outside of Connecticut even though Hayes would be, for the time being, in charge.
Connecticut, while still above its weight Fortune 500 company headquarters, has seen a troubling trend of departures in recent years.
That includes Aetna and Eversource, the latter being co-located in Hartford and Boston in name only; it’s a Boston company in reality.
General Electric Co. also moved its head office to Boston in 2016 in an effort to obscure its deeper troubles as the formerly powerful company reorganized itself. That was part of a breakup of GE Capital, which once had 5,000 employees in Connecticut, more than the result of high taxes in Connecticut, which GE mostly didn’t pay.
Hayes ascended to the CEO office in late 2014 upon the sudden departure of Louis Chenevert. Many in Connecticut feared he would cut employment in the home state because he was the executive who famously said, in 2010, that work would move to lower-cost places, “anyplace but Connecticut.” In fact, Hayes has boosted Connecticut employment, led by engineering and design at Pratt, which is going strong in a boom that dates to before the Great Recession, fueled by the
F-35 jet fighter engine and the new generation of geared turbofan commercial engines.
It’s not publicly known how many jobs Otis and the building systems businesses have in Farmington, and whether those jobs would remain in Connecticut after the planned spinoffs. But it’s probably less than 1,000 total and those decisions would not be related to a Raytheon merger.
UTC, a longtime part of the Dow Jones index of bellwether companies, was founded in 1929 in East Hartford as United Aircraft Co. Its lineup included Pratt; Boeing; Hamilton, then a propeller maker; the air carrier that became United Airlines; and Sikorsky Aircraft and Chance Vought, both airplane makers. The federal government broke it up in
1934.
Sikorsky became the world’s largest helicopter maker starting in 1939 when Igor Sikorsky persuaded the United Aircraft board to let him develop the world’s first commercially viable rotorwing aircraft in Bridgeport and Stratford.
In the 1970s, CEO Harry J. Gray turned United Aircraft into the conglomerate United Technologies, buying Otis and Carrier as he pioneered the hostile takeover, and moving the headquarters to Hartford.
UTC sold Stratfordbased Sikorsky to Lockheed Martin for $9 billion in 2015 and moved its headquarters to Farmington, where Otis and Carrier were based.