The all-stock deal will "create a premier systems provider with advanced technologies to address rapidly growing segments within aerospace and defense", the companies said.
"The combined company, which will be named Raytheon Technologies Corporation, will offer expanded technology and R&D capabilities to deliver innovative and cost-effective solutions aligned with customer priorities and the national defense strategies of the US and its allies and friends", a joint statement from the two companies read.
Defense and aerospace companies have been consolidating for years, and the U.S. industry is now dominated by five players: Boeing, Lockheed Martin, Northrop Grumman, Raytheon, and General Dynamics.
In an interview on CNBC Monday, President Donald Trump-otherwise a fan of large weapons companies-also expressed concern about the proposed merger. The deal will return $18 to $20 billion back to shareholders in the first 36 months after closing, expected in the first half of 2020, the companies said in an announcement on Sunday.
It is unclear whether the merger between Raytheon and United Technologies will necessarily hurt competition. Raytheon shareholders are set to receive 2.3 shares in the combined company for each Raytheon share now owned.
The merger is expected to be one of the largest of the year.
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Raytheon and United Technologies are combining in what the aerospace and defense giants are calling "a merger of equals".
Trade tensions between the United States and China were blamed at least partly by analysts for that delay, but a source close to the deal said the companies did not expect this to be repeated because Raytheon does not do business in China.
The companies said they will be able to develop new technologies more quickly with combined R&D spending of $8 billion annually and more than 60,000 engineers. It would bring together Raytheon's expertise in missiles, targeting systems and defense electronics with Pratt & Whitney's jet engines business and Collins Aerospace's avionics expertise. "Raytheon Technologies will continue alegacy of innovation withan expanded aerospace and defense portfoliosupported by the world's most dedicated workforce", said Tom Kennedy, Chairman and CEO of Raytheon.
Raytheon Technologies will be based near Boston.
The merger is expected to be completed in early 2020. Obama administration defense secretary Ash Carter told reporters in 2015 that he wanted to "avoid excessive consolidation in the defense industry to the point where we did not have multiple vendors who could compete with one another on many programs". Connecticut-based United Technologies was founded in 1934 and makes products for the aerospace and building sectors, including airplane engines and spacesuits. "The resources of the combined company will allow us to do things that on a standalone basis would have been very hard".