United Technologies and Raytheon recently announced plans to merge and form the second-largest defense company by revenue. This dashboard is the second of a four-part series that highlights what we at Trefis expect from this merger, and includes our outlook and expectations of margins, as a result of the merger.
About United Technologies:
United Technologies is a defense and technology-hardware company and is the 11th largest global defense supplier by revenue. It derives around 13% of its revenue from defense sales through its two defense division:Collins Aerospace divisionPratt & Whitney division, that makes aircraft engines,
Raytheon is the 3rd largest defense supplier globallyIt derives well over 90% of its revenues from defense sales through its two main defense divisions Defense , Space and Intelligence divisionIntegrated Defense & Missile Systems division
Key Notes About The Merger:
United Technologies has agreed to buy Raytheon in an all-stock deal. Post-merger, United Technologies shareholders will own 57% of the company while Raytheon's shareholders will own 43% of the company.Raytheon shareholders will get 2.34 shares in the new company for every Raytheon share they currently hold.Post-merger the company will form the largest defense-only company globally, with the non-defense divisions (Otis and Carrier), slated for spin-off later this year
Four sources of synergies that will drive margins:
A) Supply Chain and Procurement.
With key capital intensive division, such as, missile, avionics, radar, and propulsion division set to witness lower cost of procurement, the reduction in cost, should help drive gross margins (details below).
B) Corporate synergies will largely be a result of personnel and cross department synergies.
C) Facilities consolidation synergies will largely be a result of production synergies, that stem from better lead times, and improved manufacturing processes.
D) IT and other SG&A synergies, will result from consolidation of back end and back office operations.
DISAGREE WITH OUR FORECASTS? CREATE YOUR OWN
1. How to save your forecasts:
Click on the blue Try Trefis button in the header to create an account, then navigate back to this dashboard. Now, any changes you make to these inputs will be auto-saved as a scenario (see left panel of dashboard).
2. How to monitor your scenario vs. actual results
Once you have saved your forecast, you can rename your scenario by clicking on the gear icon next to the scenario (on the left panel). For more info, see this quick, 30-sec video (look at the 9 sec mark)
With your forecast saved and named, you can see how well you forecast the performance of the company at the end of each period and compare your forecasts to hundreds of other Trefis users who came up with their own forecasts. Lastly, you can share with friends and colleagues to show them how you fared and compare your forecasts to theirs.