Lockheed Martin buys Sikorsky Aircraft for $9 billion

Lockheed Martin Corp. is buying United Technologies Corp.’s Sikorsky unit, adding the largest maker of military helicopters to a lineup that includes warplanes and missiles, for $9 billion.

Aside from Black Hawk helicopters, Sikorsky makes presidential helicopters. Sikorsky helicopters have also returned astronauts home after they splashed down in the Pacific Ocean at the end of their space travels. Sikorsky had sales of about $7.45 billion last year.

With a deal, Lockheed would extend its status as the world’s largest defense contractor and widen its lead over Boeing Co. in the U.S. It would be the biggest aerospace acquisition since 2012, when United Technologies bought Goodrich Corp. for more than $16 billion, according to data compiled by Bloomberg.

“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 said 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.”

Acquiring Sikorsky is significant for Lockheed Martin, which does not produce a helicopter but has worked with both Sikorsky and Bell Helicopter on projects. It will add Sikorsky to its Mission Systems and Training Unit headquartered out of Washington D.C., a company official said.

As a result, the addition of Sikorsky to Lockheed Martin’s portfolio will not have any impact on its aeronautics unit based in west Fort Worth. Lockheed employs more than 13,000 people in west Fort Worth, including about 8,800 on the F-35 fighter jet program.

For United Technologies, the sale caps a review started after Chief Executive Officer Gregory Hayes was appointed to his job in November. The company said earlier this year that it planned to shed Sikorsky, either through a sale or spinoff.

Cutting ties to Sikorsky will let the company focus on divisions making jet engines, air conditioners and elevators while exiting the very different business of supplying rotary-wing aircraft to the U.S. and foreign armed forces.

United Technologies shares have fallen about 3.7 percent this year, to $110.74 as of July 17. Lockheed’s stock price has risen 4.8 percent to $201.18 in the same period. United Technologies has has owned Sikorsky for almost 90 years.

Lockheed Martin, headquartered in Bethesda, Maryland, expects to fund the acquisition with cash on hand and new debt. It also said that the price will be effectively reduced to about $7.1 billion after taking into account tax benefits resulting from the transaction.

United Technologies, based in Hartford, Connecticut, said that it plans to use the sale’s proceeds for additional stock buybacks.

Prior to the sale, Textron, the owner of Fort Worth-based Bell Helicopter, was identified as a bidder to buy Sikorsky. Reuters reported that Textron was talking with private-equity firms to help with its bid. A company spokesman said Bell Helicopter did not have any comment on the sale.

Bell has trimmed jobs over the past couple of years because of a slowdown in commercial helicopter orders and reduced production of its V-22 Osprey tilt-rotor aircraft. In April, the company announced plans to cut 1,100 jobs — more than 12 percent of its workforce - including up to 700 in Texas.

Bell has about 4,600 employees in Fort Worth, mostly at its east Fort Worth campus, which has been undergoing renovations. It also has about 800 workers in Amarillo.

But last week Bell announced the sale of five V-22 Ospreys to Japan, the first such purchase of the versatile tilt-rotor aircraft through the U.S. government's foreign sales program. The $332.5 million contract, was awarded to Bell Boeing, an alliance of the two defense contractors , was made through the U.S. Navy.

Sales have been helped by the aircraft's successful deployments in Iraq and Afghanistan, where the Osprey has amassed more than 250,000 flight hours, company officials have said.

Last year, the Pentagon notified Congress of the possible $1.13 billion sale of at least six V-22s to Israel.

Lockheed Martin’s purchase of Sikorsky is targeted to close by the end of the year or in 2016’s first quarter.

Staff writer Max B. Baker contributed to this report which includes material from The Associated Press, Bloomberg News and Star-Telegram archives.

This story was originally published July 20, 2015 at 10:06 AM with the headline "Lockheed Martin buys Sikorsky Aircraft for $9 billion."