Lockheed Martin Corp (LMT.N) said Monday it would buy Sikorsky Aircraft, the helicopter unit of United Technologies Corp (UTX.N), for $9 billion, and would review the possible sale or spinoff of $6 billion in other information technology and services businesses.
The Pentagon's largest supplier said the net cost of the Sikorsky deal was around $7.1 billion, taking into account tax benefits resulting from the transaction. Lockheed also reported higher earnings and revenue for the second quarter..
The deal cements Lockheed's dominance in weapons making and opens key new foreign markets for the company, which dwarves its nearest competitors, the defense business of Boeing Co (BA.N) and Northrop Grumman Corp (NOC.N).
"Sikorsky is a natural fit for Lockheed Martin and complements our broad portfolio of world-class aerospace and defense products and technologies," Lockheed Chief Executive Marillyn Hewson said in a statement.
Lockheed, which makes F-35 fighter jets, naval ships and high-end government satellites, said the purchase would have no impact on its commitment to return cash to shareholders through dividends and to reduce outstanding share count to below 300 million shares by the end of 2017.
It said it repurchased 4.9 million shares for $937 million in the quarter, up from 0.8 million shares for $124 million in the year earlier period.
Lockheed said it would align Sikorsky under its mission systems and training business, which had already worked closely with Sikorsky on several helicopter programs.
The company expects to close the transaction by late in the fourth quarter of this year, or early in 2016, depending on regulatory approvals.
It said it would complete a strategic review of its government IT infrastructure services business and the technical services business within its missiles and fire control segment by the end of the year, units with about 17,000 employees.
The company will retain services businesses focused on defense and intelligence customers.
UTC said proceeds from the sale of its copter unit would fund more share buybacks to offset the earnings impact from the departure of Sikorsky. Its board authorized a share buyback of up to 75 million shares, which would be worth about $8.3 billion based on Friday's closing price, the company said.
"Exiting the helicopter business will allow UTC to better focus on providing high-technology systems and services to the aerospace and building industries and to deliver improved and sustained value to our customers and shareowners," UTC Chief Executive Greg Hayes said in a statement.
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