Raytheon (NYSE:RTN) has announced plans to combine with the aerospace arm of United Technologies (NYSE:RTX). In this segment of Industry Focus: Energy, Motley Fool's Nick Sciple and Fool.com contributor Lou Whiteman provide an overview of the deal, and what each side brings to the table.

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This video was recorded on June 27, 2019.

Nick Sciple: Today, we're here to talk about, as I said, United Technologies and Raytheon. On June 9th, they announced a merger of equals that will create a combined company, I believe, at $120 billion. When you look at this deal, first off the top, what was your reaction when you saw the news come down?

Lou Whiteman: It's a heck of a deal for a few reasons. For one, in the context of the defense side, Raytheon is more of a defense company and United Technologies, we're talking about only their aerospace assets. I'm sure we'll get into that. But they're in the process of splitting three ways. But United Technologies is primarily a commercial aerospace company. On the defense side, since the 1990s, we haven't seen any tier-one prime consolidation. This doesn't count, because it's not like Raytheon and Lockheed Martin are coming together. But there's been an open question for going on 20 years, the so-called Big Five or the big prime contractors, are they boxed in? What can they do? This is a pretty creative answer to that. So, wow, but also very interesting.

Sciple: You take a look, United Technologies is going to get about 57% of the combined company, but they're going to split the board about 50/50. United Technologies CEO becomes CEO of the combined company. Raytheon's CEO is going to be the chairman. But it looks like he's going to be heading out in a couple of years. What do you see in how these companies are coming together from a combination point of view in reaction to how things are getting split off and the leadership transition between the two companies?

Whiteman: I like Tom Kennedy, Raytheon's CEO. I'm not surprised that he's willing to step aside here. I think he was probably thinking succession plan anyway. Greg Hayes is relatively new on the job, but he's done a good job. He's been more decisive than some of his predecessors have been. Case in point, this. He's an aggressive guy. I think he's up for the challenge. But boy, he's loading up his plate.

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