Lockheed Martin to Buy UTC’s Sikorsky in $9B Deal

In July 2015, Lockheed Martin Chairman and CEO Marillyn Hewson announced her decision to purchase the Sikorsky helicopter operations of United Technologies for USD$9 billion while putting $6 billion in Lockheed’s existing services businesses under review for potential sale or spinoff. She believes this big move will strengthen company financials over time by substituting higher-margin rotorcraft work for commodity IT and technical services.

This move is by far the biggest strategic change the company has undertaken since Hewson became CEO in January of 2013. During the past two years under her tenure, Lockheed’s share price has risen from below $90 to over $200 as net profit margins and dividends per share have risen rapidly. Acquiring Sikorsky will improve the company’s market positioning, which is already viewed as one of the best among top tier defense contractors. In addition, it will be UTC CEO Greg Hayes’ first major strategic move since his promotion last November.

A short term benefit of acquiring Sikorsky is the boost to Lockheed’s annual revenues and backlog. According to research service reports, Sikorsky revenues have an estimated growth of up to USD$10 billion annually over the next decade, largely supported by United States military orders.

In the long term, the deal will make Lockheed less dependent on the $391 billion F-35 fighter jet business, while expanding its overseas sales by adding Sikorsky's iconic Black Hawk helicopters to a product line that already spans everything from satellites to naval ships. Lockheed and Sikorsky already work together on several major helicopter programs, including the presidential helicopter, a combat rescue helicopter and the MH-60R- and S-model helicopters built for the Navy and Marine Corps.

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1. jacob luiz
2. Posted on July 22, 2015
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