Why This Billionaire Investor is “Extremely Concerned” Over America’s Largest Merger

Bill Ackman

Bill Ackman, head of Pershing Square Capital and one of the best-known activist investors on Wall Street, is fighting against one of the largest, mega mergers taking place in the American public market.

United Technologies Corp (NYSE: UTX) and Raytheon (NYSE: RTN), two giants that are slated to create one of the largest aerospace and defense companies in a $100 billion all-stock transaction, are expected to finalize their deal this week.

While many are looking forward to this deal, Bill Ackman stands against it, having recently send a message to United Technologies’ CEO.

As reported by The Wall Street Journal, Ackman sent an email to Greg Hayes, CEO of United Technologies, on Sunday where he said he was “extremely concerned” about the merger. It “makes no sense to us why you would consider a stock acquisition using today’s massively undervalued UTC common stock to buy a large business of inferior quality to the company’s existing businesses, and for which we cannot comprehend the strategic logic,” he wrote, adding that should United technologies go through with the deal, Ackman would do everything in his power to oppose it.

While Bill Ackman holds only a small, 0.7 percent stake in United Technologies, he remains a highly influential voice in the world of Wall Street, having taken a number of high profile positions in the past. Surprisingly enough, even President Trump expressed some worries about the potential deal, adding to the general concern surrounding the arrangement.

United Technologies responded by dismissing Ackman’s concerns in a response that stressed they were confident the deal would add value to shareholders. So far, the deal is expected to go through, pending regulatory and shareholder approval.

Being the largest merger in 2019 so far, the deal has faced a number of challenges from other activist investors as well, having beaten back their attempts to derail the merger so far. Time will tell whether Bill Ackman will succeed in halting this development.

Shares of United Technologies fell by around 4 percent in response to the news announcement, while Raytheon’s stock also fell by 5 percent. Both companies, which have market caps of $106 billion and $50 billion respectively, have seen their share prices increase over the past six months

United Technologies Company Profile

United Technologies is a diversified industrial company currently operating four segments. These include Pratt & Whitney (commercial and military aerospace), Collins Aerospace Systems (aerospace systems), Otis (elevators and escalators), and Carrier (HVAC, refrigeration, and fire and security).

UTC completed the acquisition of Rockwell Collins in November 2018, creating one of the aerospace industry’s largest installed bases. In November 2018, the company announced its intent to split its aerospace and commercial platforms.

UTC will remain an aerospace company and will retain both Pratt & Whitney, which is most known for its flagship geared turbofan engine, and Collins Aerospace Systems. UTC will also spin off both Otis and Carrier sometime during the front half of 2020. – Warrior Trading News

Raytheon Company Profile

Raytheon is a U.S. defense contractor that posted just over $27 billion in sales during 2018. It operates through five segments: integrated defense systems, intelligence and information, missile systems, space and airborne systems, and a cybersecurity business branded Forcepoint.

Sales to the U.S. government account for about 70% of consolidated revenue. Based in Waltham, Massachusetts, Raytheon employs more than 60,000 people. – Warrior Trading News