LE BOURGET, France — The CEOs of Raytheon and United Technologies seemed to convince U.S. President Donald Trump that the merger of the two companies would be “great for America,” in the words of Raytheon chief Tom Kennedy.
In an interview with Defense News at the Paris Air Show, Kennedy provided more details about the meeting he and UTC boss Greg Hayes had with Trump on June 10 about the all-stock deal, after Trump expressed concerns about its implications during an interview.
“We met with the president. We went through why this is complementary, not competitive,” with less than 1 percent overlap, said Kennedy in an interview with Defense News at the Paris Air Show.
Prior to the meeting with the CEOs, Trump expressed concern in an interview with CNBC, saying aerospace companies have “all merged in, so it’s hard to negotiate” with them. He suggested the defense industry could be heading in the same direction.
Once combined, the company will have approximately $74 billion in pro forma 2019 sales. Kennedy argues the sheer scale will leave the company better able to win international business that creates jobs in the U.S. — jobs that he called “noble,” with higher-than-minimum wage and solid health benefits.
This was a message that was well-received by the president, Kennedy said.
“We don’t compete against companies, we compete against countries, and this would allow us to support international contracts to bring back jobs to the United States,” he said. “It’s great for America, and [Trump] clearly understood it; he understood it’s tough competing internationally — you need a strong company to do that. He understood that aerospace and defense jobs are great jobs. Once he got the information, it was a very positive meeting."
The deal will be reviewed by the Justice Department and the Pentagon to ensure a tie-up wouldn’t restrict competition, but early indications show few red flags. Ellen Lord, undersecretary of defense for acquisition and sustainment, told the Wall Street Journal at the Paris Air Show that she didn’t see a tremendous amount of overlap and that she is “a believer in letting free markets play.”
Kennedy also emphasized the cost savings that would be returned to the U.S. customer, estimating that by the fourth year the combined company will achieve $1 billion gross in cost savings, with 50 percent returned in the form of reduced rates on contracts.
In general, “the president should be worried about competition,” Kennedy said, understanding that any mega deal needs to be evaluated. “But this is complementary. ... It was a positive meeting. I think we provided the information not provided to him before.”
Jill Aitoro is editor of Defense News. She is also executive editor of Sightline Media's Business-to-Government group, including Defense News, C4ISRNET, Federal Times and Fifth Domain. She brings over 15 years’ experience in editing and reporting on defense and federal programs, policy, procurement, and technology.