Aerospace giant Lockheed Martin Corporation agreed to pay $9 billion in cash to its counterpart defense contractor United Technologies Corporation for the latter’s Sikorsky Aircraft business, a deal still subject to regulatory approvals and customary closing conditions. The deal, which UTC noted is likely to close later this year, will be valued at approximately $7.1 billion after tax benefits resulting from the transaction, according to Lockheed.
The two companies agreed to make a joint election under Section 338(h)(10) of the Internal Revenue Code, thereby treating the transaction as an asset purchase for tax purposes. This will generate a tax benefit estimated at $1.9 billion for Lockheed Martin and its shareholders.
"We are very pleased to announce this transaction," according UTC president and CEO Gregory Hayes, who explained that exiting the helicopter business would allow UTC to focus on providing high-technology systems and services to the aerospace and building industries. "Sikorsky's acquisition by Lockheed Martin… will ensure it remains a technology leader at the forefront of vertical lift," Hayes added.
Sikorsky Aircraft manufactures helicopters of all sizes, gliders, light aircraft, and unmanned aerial vehicles (i.e., drones.) UTC announced plans to dispose of the holding earlier this year,
“Sikorsky is a natural fit for Lockheed Martin and complements our broad portfolio of world-class aerospace and defense products and technologies,” stated chairman, president, and CEO Marillyn Hewson. “I’m confident this acquisition will help us extend our core business into the growing areas of helicopter production and sustainment. Together, we’ll offer a strong portfolio of helicopter solutions to our global customers and accelerate the pace of innovation and new technology development.”
Lockheed will organize Sikorsky under its Lockheed Martin Mission Systems and Training (MST) business segment. Currently, Sikorsky and MST are partners in the VH-92 presidential helicopter, combat rescue helicopter, and the naval MH-60 helicopter, among other defense programs.