WASHINGTON — Defense giant Lockheed Martin will buy American helicopter maker Sikorsky Aircraft from United Technologies for $9 billion in cash, UTC announced Monday.
The announcement ends months of speculation over the fate of Sikorsky, which had been subject to sales and spinoff rumors fueled by the emergence of multiple bidders during the Paris Air Show in June.
"We are very pleased to announce this transaction," said UTC President and Chief Executive Officer Gregory Hayes. "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.
"Sikorsky's acquisition by Lockheed Martin, one of the world's leading aerospace and defense companies, will ensure it remains a technology leader at the forefront of vertical lift," Hayes added. "We are committed to working closely with Lockheed Martin to execute a seamless transition for customers and employees."
UTC indicated that it will use the bulk of the proceeds — $8.3 billion — to buy back 75 million shares.
Wall Street analysts were not surprised by the deal — Lockheed Martin had been singled out as the most likely buyer in multiple press accounts — and indicated
LM will group Sikorsky with its Mission Systems and Training (MST) business, noted Byron Callan, an analyst with Capital Alpha Partners.
"MST has worked closely with Sikorsky but Aeronautics should know more about building platforms," Callan wrote in a note for investors.
Lockheed Martin is a major supplier of parts for Sikorsky's systems, including the popular UH-60 Black Hawk utility helicopter and CH-53K heavy-lift vehicle.
Robert Stallard of RBC Capital Markets said for Lockheed Martin, Sikorsky is a "nice to have" business, not a "need to have."
"We view Sikorsky as a quality asset which is going through some challenges at the moment, particularly with oil & gas hitting civil helicopter demand," Stallard wrote in an analyst's note. "However, its long term outlook is solid with the CH-53K, the Presidential Helicopter, the CRH and continued export demand. For Lockheed, it has plenty of positive growth drivers already in the portfolio, notably the F-35, and it does not need Sikorsky - but it could be a business that is nice to have. Whatever happens, we don't see Lockheed changing its commitment to return 100% of free cashflow to shareholders."
The deal is expected to be completed in the final quarter of 2015 or the first quarter of 2016.
"Sikorsky is a natural fit for Lockheed Martin and complements our broad portfolio of world-class aerospace and defense products and technologies," said Marillyn Hewson, Lockheed Martin chairman, president and CEO, in a prepared statement. "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."
