Pentagon: Defense giants aim to get bigger
United Technologies Corp. and Raytheon agreed to team up this week to create “a new aerospace and defense giant,” saidJames Fontanella-Khan in the Financial Times. The deal would “combine Raytheon’s operations in missile defense and precision weapons” with UTC’s commercial and military aerospace production to form a $120 billion “powerhouse”—the second-largest defense contractor, by revenue, behind only Boeing. While the companies have argued their products don’t overlap, analysts greeted the announcement with caution. President Trump, in an interview on CNBC, suggested a merger would hurt competition, and William Ackman, a major UTC investor, refused to back it.
There has been a massive stretch of consolidation in the aerospace and defense industry, said Doug Cameron and Ben Kesling in The Wall Street Journal. The industry lost an estimated 17,000 firms between 2001 and 2015. That’s left aerospace with “three plane makers versus a dozen `just decades ago,” and “only two big shipbuilders, General Dynamics and Huntington Ingalls.” At most, “three companies typically submit bids for most big defense contracts.” Pentagon officials have been discouraging further mergers. But the military’s own focus on fewer weapons systems has hastened the growth of the defense-contract giants.
Rick Koehler/Pratt & Whitney, Alamy