Raytheon Wins Contracts Worth $2.4BN, UTC Merger Approved with Divestments

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Thursday was a big day for Raytheon, when the radar and rockets manufacturer that reported $29 billion of sales in 2019, won $2 billion in new contracts after a $400 million win last week. Raytheon’s merger with UTC, with $77 billion of sales, was also approved on the same day, contingent on divesting from businesses where the new defense giant would hold a near-monopoly position.

The news is positive for the merge conglomerate that, before the divestments, would include 275,000 workers. The Department of Justice on Thursday ruled that Raytheon would have to divest its military airborne radios business and UTC would need to shed its military global positioning systems (“GPS”) and large space-based optical systems businesses in order to proceed with their proposed merger.

The DOJ said Raytheon and UTC are the only firms that develop, manufacture, and sell military airborne radios, which allow for secure voice, data, and video communications to and from aircraft, and are installed on every airplane and helicopter currently used by DoD. They are the only competitors for military GPS systems for aviation and maritime applications, and are two of the three competitors for military GPS systems for ground applications.

“Today’s settlement protects the American taxpayer by preserving competition that leads to lower costs and higher innovation in critical military and defense products,” said Assistant Attorney General Makan Delrahim of the Antitrust Division.

“The merger, as originally proposed, would have eliminated competition in the supply of military airborne radios and military GPS systems, and would have positioned the merged firm to harm rivals capable of making key components for reconnaissance satellites.  These horizontal and vertical concerns are resolved by the Division’s structural remedy, which includes the divestiture of three separate business units.”

Rather than an impediment, selling the businesses would mean another large inflow of cash for the merged group.

And speaking of cash, the $2 billion big contract was for Raytheon’s SM-3 interceptor, a defensive weapon the U.S. Navy uses to destroy short- to intermediate-range ballistic missiles.

The interceptor uses sheer force, rather than an explosive warhead, to destroy its target. Its “kill vehicle” hits threats with the force of a 10-ton truck traveling 600 mph. This technique, referred to as “hit-to-kill,” has been likened to intercepting a bullet with another bullet, according to a statement and DefPost military report.

Raytheon Missile Systems was awarded a sole-source, multi-year contract, worth around $2.1 billion, in support of the Standard Missile-3 Block IB missiles from the U.S. Missile Defense Agency (MDA) at Dahlgren, Virginia. The first $1 billion correspondes to FY 2019 and 2020 procurement.

Raytheon will provide the management, material and services associated with the procurement, manufacture and assembly of the Standard Missile-3 Block IB all up rounds for the U.S. and Foreign Military Sales (FMS) partners. Work will be performed in Tucson, Arizona and Huntsville, Alabama.

Last week, Raytheon won a $392 million contract for AIM-9X Sidewinder Missiles.

This modification exercises options for the production and delivery of tactical missiles (Lot 20 AIM-9X, Block II and Block II plus), captive air training missiles (CATM), plus all up round tactical missiles, captive test missiles, special air training missiles, advanced optical target detectors, Block II and II plus guidance units (live battery), captive air training missile guidance units (inert battery), Block I and II propulsion steering sections, electronic units, multiple purpose training missiles, tail caps, maintenance, sectionalization kits, containers, and spares. In addition, this modification provides for material in support of repairs, depot maintenance and refurbishment.

The award is in support of the U.S. Air Force, U.S. Navy and the governments of Australia, Bahrain, Belgium, Bulgaria, Denmark, Finland, Israel, Japan, Morocco, the Netherlands, Norway, Oman, Poland, Qatar, Romania, Singapore, Slovakia, South Korea, Switzerland, Taiwan, Turkey and the United Arab Emirates (UAE).

Also on this big Thursday, Raytheon Missile Systems also reached a $1 billion, five-year strategic agreement to purchase propulsion systems from Aerojet Rocketdyne for Standard Missile products. The deal represents a supply chain centerpiece of multi-year Standard Missiles contracts that Raytheon recently received.

“Moving to multi-year, rather than annual-year contracting enables Raytheon and its supply chain to deliver even more value to our Missile Defense Agency and U.S. Navy customers, and the taxpayer,” said Eugene Jaramillo, Raytheon Missile Systems vice president of Global Supply Chain Management

And one more contract. Raytheon, on Thursday, was awarded a $1 million research contract by the U.S. Defense Advanced Research Projects Agency (DARPA) for the development of an RDE Powered Long Range Strike Missile. The contract was announced on the Federal contracting website, beta.sam.gov and first reported by DefPost.

“A rotating detonation engine (RDE) is a proposed engine using a form of pressure gain combustion, where one or more detonations continuously travel around an annular channel. In detonative combustion, the results expand at supersonic speed. It is theoretically more efficient than conventional deflagrative combustion by as much as 25%. Such an efficiency gain would provide major fuel savings but disadvantages include instability and noise,” DefPost said.

 

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