Activist investor Bill Ackman opposes Raytheon-United Technologies merger

United Technologies to merge with Raytheon

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A planned merger between Raytheon and United Technologies is facing an early hurdle from a top activist investor.

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Pershing Square Capital’s Bill Ackman sent a letter on Sunday to United Technologies CEO Gregory Hayes, prior to the announcement of the deal, urging the Farmington, Connecticut-based company to abandon the merger because it would “significantly lower the business quality” of its aerospace business.

“If the company intends to go forward with such a transaction, we will oppose it, publicly if necessary, as we expect will the substantial majority of the company’s shareholders,” he wrote in the correspondence obtained by FOX Business.

Hayes on Wednesday defended the merger as one that will be beneficial in the long-term.

"We have unlimited potential to grow this business through the innovation agenda, through all of these 60,000 engineers we have. We have $8 billion in research and development," he told FOX Business, adding that a meeting with Ackman was scheduled for Thursday.

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Among Ackman’s criticism of the deal is Raytheon’s reliance as one of the top U.S. defense contractors on the Pentagon’s yearly budgets that have “limited visibility and high volatility” and “can change drastically based on the dominant political party’s priorities.”

Shareholders will also be concerned over the ability to allocate capital after the all-stock merger that will dilute the value of outstanding shares, he said.

“Management credibility is at risk just from proposing, let alone effectuating such a transaction,” Ackman wrote.

Ticker Security Last Change %Chg
UTX UNITED TECHNOLOGIES CORPORATION 122.94 -5.07 -3.96%
RTN RAYTHEON COMPANY 177.62 -9.57 -5.11%

Pershing Square previously owned 5.8 million shares of United Technologies.

On top of Ackman’s opposition, President Trump previously said he was “a little concerned” about the deal that would create the second largest aerospace and defense company behind Boeing.

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“I just want to see competition. They’re two great companies, I love them both. But I want to see that we don’t hurt our competition,” he told CNBC.

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