Lockheed Martin to acquire Sikorsky for $9 billion

Lockheed Martin Corp. (NYSE: LMT) has agreed to acquire United Technology Corp.’s Sikorsky Aircraft Corp. for $9 billion.

That price is “effectively reduced” to about $7.1 billion after taking into account tax benefits resulting from the transaction, the Bethesda, Maryland–based defense contractor said in a news release issued Monday morning.

Sikorsky, which specializes in the design, manufacture, and service of military and commercial helicopters, is a subsidiary of United Technologies Corp. (NYSE: UTX), the parent company of Carrier Corp., which has operations in DeWitt.

The website for Reuters first reported the acquisition on Sunday.

Lockheed will fund the transaction with a combination of new debt and available cash, according to a slide presentation during the company’s Monday morning webcast announcing the acquisition.

Sikorsky is a “natural fit” for Lockheed Martin, Marillyn Hewson, chairman, president, and CEO of Lockheed, said in the webcast.

“It complements our broad portfolio of world-class aerospace and defense products and technology. This action will enable us to extend our core business into the $30 billion annual military and commercial rotary-wing segment,” Hewson said in her remarks.

The acquisition is subject to customary conditions, including securing regulatory approvals. Lockheed expects the acquisition will close by the end of the year or early in the first quarter of 2016.

The transaction will have “no impact” on the company’s previously stated “commitments” to return cash to shareholders through dividends and to reduce its outstanding share count to below 300 million shares by the end of 2017, the company said.

 

Aligning Sikorsky

Lockheed Martin plans to align Stratford, Connecticut–based Sikorsky under its mission systems and training (MST) business segment.

The MST unit has operations in both Salina in Onondaga County and Owego in Tioga County.

Lockheed and Sikorsky currently partner on a “number” of programs, including the VH-92 Presidential helicopter, combat-rescue helicopter and the naval MH-60 helicopter, Lockheed said.

The companies have a 40-year history of partnering on programs, according to the news release.

Sikorsky has 15,000 employees and operates in 20 countries with products used in more than 40 countries, according to the Lockheed Martin online slide presentation.

Sikorsky expects to generate revenue of $6.5 billion in 2015 with its revenue composition split equally between domestic and international customers.

About 75 percent of its customers are from the military and 25 percent come from the commercial sector, according to the Lockheed slide presentation.

 

Earnings, review announcement

Lockheed Martin made its announcements as the firm shared its second-quarter financial results.

The defense contractor reported net earnings of $929 million, or $2.94 a share, during the second quarter on net sales of $11.6 million, Lockheed said in a separate news release issued Monday.

Shares of Lockheed Martin were trading up $4.05 at $205.23, as of nearly 2:30 p.m. this afternoon, according to Yahoo Finance.

Besides the Sikorsky acquisition, Lockheed Martin announced it will conduct a “strategic” review of alternatives for its government information-technology and technical-services businesses.

The review will focus “primarily” on the information systems and global solutions business segment and a portion of the missiles and fire-control unit.

“The strategic review will address the changing market dynamics affecting these businesses and will help us determine how to best position them for future growth and is expected to result in the spinoff or sale of the businesses,” said Hewson.

The programs represent roughly $6 billion in estimated 2015 annual sales and more than 17,000 employees, the firm said.

 

Contact Reinhardt at ereinhardt@cnybj.com