Plans for Raytheon and UTC Pensions, Investment Divisions Unclear After Merger

Massive new corporate combination has $94 billion in retirement assets.

Raytheon and United Technologies Corp. (UTC), already aerospace and defense titans in their own right, will merge to become an industry leviathan. But their proposed union leaves an open question, at this stage, of how the $94 billion in retirement assets (both defined benefit and defined contributions plans) will be managed.

The deal, announced Sunday as a “merger of equals,” will have a 2019 revenue of about $74 billion for the soon-to-be Raytheon Technologies Corp., the companies said. Goals for RTC include “significant R&D and capital investment through business cycles.”

That means speeding up production of future missile systems and other weapons, cybersecurity, and artificial intelligence. Plus, the company gets a nice, big balance sheet to work with.

There was no mention, however, of what will happen to the combined $94 billion in pension assets and how the investment teams—if there are still two at the end of the day—will manage them.

Because of its size, Raytheon Technologies will likely undergo several evaluations as to whether combining the assets and which way they should be managed would make sense. Once that’s settled, an asset allocation policy and manager line-up will be developed and then the reallocation begins. Oftentimes, a transition manager will be brought on to help reduce market impact and cut costs.

UTC had previously combined pension liabilities when it merged with Goodrich in 2012 and Rockwell Collins earlier in the year, but those companies were smaller as they only added about $14.2 billion total to UTC’s pool. Raytheon would add about $44 billion in defined benefit and defined contribution assets to UTC’s $50 billion.

UTC officials told CIO it is too early to tell what will be done about the pensions and investment units as structural details have not yet started.

The company will be run by UTC CEO Greg Hayes while Raytheon CEO Tom Kennedy will be its executive chairman for two years before Hayes takes that crown, too.

No changes were made to Raytheon or United Technologies’ 2019 outlooks.

UTC’s previous 2020 plans called for spinning off elevator and refrigeration companies Otis and Carrier. These divestitures were also unaffected by the deal and will continue as planned.


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