"China trade split. A USA recession is overdue; 3) Defense firms will need to fund more of their own R&D in the future so joining a larger firm will limit margin pressure which could be evidenced in the 2020s", Callan wrote. Following the merger completion, the combined company intends to spend more than $8 billion in research and development projects.
The merger would give one of Tucson's major employers Raytheon, exposure to the commercial aerospace sector.
The companies said they expect to return $18 billion to $20 billion to shareholders in the first 36 months after the merger and to see about $1 billion in annual cost savings by the fourth year.
"This is bringing two great technology companies together to provide technology solutions to our aerospace and defense customers that nobody else could ever provide", said United Technologies CEO Greg Hayes, who would lead the combined company as chairman and CEO in two-years.
The two companies have some common customers, but have argued that their business overlap is limited as they face the prospect of US antitrust regulators scrutiny. Raytheon Chairman and CEO Tom Kennedy will be appointed executive chairman.
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Hayes is set to become the leader of the new company: He'll take the titles of chairman and CEO two years after the merger is finalized. This resulted in the deal closing in November 2018, as opposed to the targeted third quarter.
The air conditioning maker was a big part of the Central New York manufacturing scene before United Technologies bought it. The combination excludes Otis and Carrier, which are expected to be separated from United Technologies in the first half of 2020 as previously announced. Apart from developing new and critical technologies, the companies want to make advancements in developing hypersonics and future missile systems and directed energy weapons. A deal with United Technologies would allow Raytheon to expand into commercial aviation.
Raytheon is best known for its Patriot air defence systems nd its Tomahawk cruise missiles.
United Technologies could benefit from reducing its exposure to commercial aerospace clients amid concerns that the rise of worldwide trade protectionism will weigh on the flow of goods through air traffic.
In a phone interview Sunday evening, executives from both companies said the deal was driven by a desire to create a leading aerospace technology company using state-of-the-art hardware from the defense and commercial aviation industries. That would top giants like Lockheed Martin Corp. and Northrop Grumman Corp.
Morgan Stanley, Evercore Inc and Goldman Sachs Group Inc were financial advisers to United Technologies, while Wachtell, Lipton, Rosen & Katz was its legal adviser.