Ackman Opposes United Technologies (UTX), Raytheon (RTN) Merger

(Updated - June 11, 2019 4:51 PM EDT)

Bill Ackman of Pershing Square Capital wrote an e-mail to United Technologies' (NYSE: UTX) CEO Greg Hayes early Sunday opposing the company's merger of equals with Raytheon (NYSE: RTN). The e-mail was delivered just hours before the two companies confirmed they would merge in an all-stock mega deal.

In the e-mail, which was published at the Wall Street Journal website, Ackman called Raytheon a "significantly inferior-quality business", whose growth and profits are tied too closely to highly volatile Department of Defense budgets.

The activist hedge fund manager worries United Technologies lacks the expertise to oversea Raytheon's businesses and in attempting to do so will, at a minimum, "lose focus."

Further, United Technologies will be required to issue a substantial amount of equity at a price "significantly below its intrinsic value" due to its "large conglomerate discount", which they estimate is about 30%.

Ackman said he understands why Raytheon shareholders should love the deal but called it "disastrous" for United Technologies holders.

Pershing Square declined to comment on the e-mail.

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