Antitrust Law Daily EC clears Raytheon-United Technologies combination subject to divestitures
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Friday, March 13, 2020

EC clears Raytheon-United Technologies combination subject to divestitures

By Jeffrey May, J.D.

Remedies include divestitures of UTC’s military GPS receiver and anti-jamming business and Raytheon’s military airborne radios business to U.K.-based BAE Systems.

The European Commission (EC) announced today that it has approved the proposed acquisition of Raytheon by United Technologies Corporation (UTC) subject to divestitures. The divestitures are intended to resolve EC competition concerns that the transaction, as originally notified, would have reduced competition in the markets for military GPS receivers and airborne radios. The EC said that it worked closely with the U.S. Department of Justice in reviewing the deal.

The U.S.-based defense contractors announced their proposed combination in June 2019. "The merger of Raytheon, a leading defense company, and United Technologies, a leading aerospace company, comprised of Collins Aerospace and Pratt & Whitney, will offer a complementary portfolio of platform-agnostic aerospace and defense technologies," the companies said. In October 2019, the companies’ shareholders approved the transaction.

EC findings. During its investigation, the EC found that UTC and Raytheon are two of the very few suppliers of military GPS receivers, which are a critical input for a broad range of military systems. In addition, the firms are two major suppliers of military airborne radios. It was noted that the companies were the only two real options currently available to U.S. military aircraft manufacturers and that European armed forces procure a variety of military aircrafts from U.S. manufacturers. The vertical links between UTC and Raytheon's activities did not result to harm to competition, however. This was mainly due to the fact that the merged entity would have neither the ability nor the incentives to restrict competitors' access to essential input or to a sufficient customer base, according to the EC.

Proposed EC remedies. The EC announced proposed remedies to remove the entire horizontal overlap between UTC and Raytheon in both military GPS receivers and military airborne radios globally. The companies offered to divest: UTC’s entire military GPS receiver and anti-jamming business, located in Cedar Rapids and Coralville, Iowa; and Raytheon’s entire military airborne radios business, based in Fort Wayne, Indiana.

Split of UTC. In order for the merger of the aerospace companies to proceed, UTC was to split into three separate companies. UTC was to spin off its Carrier and Otis units. On March 11, UTC confirmed that its board of directors approved the previously announced separations of Carrier and Otis. "Executing the separations of Carrier and Otis is also a major milestone to completing the merger of UTC's aerospace businesses with Raytheon to create Raytheon Technologies, the premier aerospace and defense systems and services provider," said UTC Chairman and Chief Executive Officer Gregory Hayes.

U.S. Justice Department review. The Department of Justice Antitrust Division is apparently continuing its review of the transaction. Sometimes, an announcement of an approval in one jurisdiction will be quickly followed by a clearance in another jurisdiction. The Antitrust Division is giving the deal close scrutiny, as UTC reported that a second request for documents was issued by the agency in July last year. Other clearances, including from the Canada Competition Bureau, also are required.

Companies: Raytheon Co.; United Technologies Corp.; Carrier Global Corp.; Otis Worldwide Corp.

MainStory: TopStory AcquisitionsMergers Antitrust AntitrustDivisionNews GCNNews

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