Shares of defence contractor Raytheon and United Technologies pared gains yesterday after US President Donald Trump said he was a "little concerned" about their US$121 billion (S$165 billion) merger to create a new aero-defence company.
In a press statement, Pentagon spokesman Lt. Col. Michael Andrews said Ellen Lord, undersecretary of defense for acquisition and sustainment, is "engaging with industry leadership to understand the implications and governance as a result of this acquisition".
An agreement could also allow for increased scale and shared technology, as well as helping the enlarged company weather any slowdown in the commercial aerospace and defense industry as U.S. companies face mounting challenges due to the trade war launched by USA president Donald Trump against China. Only Boeing, with annual sales of $101bn, and Airbus, at $74bn, would be bigger.
The UTC merger with Raytheon would transform the two companies into a single conglomerate with varied but well-established brands, each in the top tier of its specialty.
"I want to see that we don't hurt our competition", Trump said in an interview with CNBC.
Sen. Chris Murphy, D-Conn., said he intends to work closely with state government officials, the Justice Department and the Pentagon to "to ensure this merger does not violate the agreement UTC signed with the state".
"We are looking forward to talking to the president later today", Hayes said. "It's already non-competitive".
One potential snag is that Patrick Shanahan, a former Boeing Co executive, is now acting secretary of defense.
United Technologies and defense contractor Raytheon have agreed a $121bn merger that will create the world's second-largest defense contractor. In pre-market trading, United Technologies rose 3.7pc to $137, while Raytheon was 9.2pc higher at $203. Both Raytheon's and United's board of directors have unanimously approved the merger, which is expected to close during the first half of 2020.
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Under the deal, the new Raytheon will consolidate its operations into four businesses: one based on intelligence and aerospace, and another based on defense and missile systems.
"This pending deal will likely raise prices, harm workers, stifle competition, and undermine innovation", the California Democrat said in a statement.
The companies' pitch also emphasized the upside in terms of technological breakthroughs through an $8 billion research and development budget, 60,000 engineers and 38,000 active patents.
The deal brings together two companies that have been intertwined with America's technological explosion of the past almost 100 years.
The combined company is to be called Raytheon Technologies.
United Technologies has moved its focus to its aerospace business through its 2018 $23 billion acquisition of Rockwell Collins and the Pratt & Whitney engines business.
An infographic on the proposed Raytheon-United Technologies merger.
A Credit Suisse note also alluded to "limited product overlap" but said the economic benefits of the deal "seem modest" and that the promised $1 billion in annual cost savings appear "somewhat questionable".