HARTFORD, Conn. -- Lockheed Martin Corp., the largest U.S. defense contractor, has agreed to buy United Technologies Corp.'s Sikorsky Aircraft for $9 billion, United Technologies announced Monday.
United Technologies Corp. said in June that it planned to shed Sikorsky so the aerospace and building systems conglomerate could better focus on high-technology systems for both of those industries.
Lockheed will add the world's largest builder of military helicopters to its arsenal.
"One of the key elements of our strategic planning is to secure and extend our core defense business, and we feel confident that the addition of Sikorksy will contribute significantly to the growth objective," Lockheed Martin Chief Executive Officer Marillyn Hewson said during a conference call.
Sikorsky builds the Black Hawk and the presidential Marine One helicopters, the Stallion family of U.S. Marine Corps helicopters, and rotorcraft used to ferry workers to offshore oil platforms. Sikorsky has 15,000 workers worldwide.
The agreement culminates a strategic repositioning that started late last year when Gregory Hayes took over as the United Technologies chief executive from Louis Chenevert. Hayes has been outspoken in saying Sikorsky's growth prospects are limited.
"The decision to sell Sikorsky was not an easy one, but it is the right one for both Sikorsky and UTC," Hayes wrote in an email to United Technologies employees. "This transaction will also allow UTC to focus on providing high-technology systems and services to the aerospace and building industries. By focusing on our core businesses, UTC is better positioned to deliver value to customers, growth for shareowners and opportunities for employees."
Lockheed Martin plans to add Sikorsky to its mission systems and training unit. The Bethesda, Md., defense contractor expects to fund the acquisition with cash on hand and new debt issuances.
Even though the company is a leader in the industry, Lockheed can improve Sikorsky, particularly on contracting, cash flow and in reviewing the international security needs of customers, said Lockheed Chief Financial Officer Bruce Tanner.
"We think it fits well into our portfolio, and this is what we do," Tanner said.
Lockheed Martin is now reviewing its options for its government information technology and technical services businesses, primarily in the information systems and global solutions business segment, and a portion of the missiles and fire control business segment. They represent about $6 billion in estimated 2015 annual sales.
United Technologies, based in Hartford, said it will use proceeds from the sale to buy back company stock.
Cowen and Co. analyst Cai von Rumohr wrote that the proposed sale may be a "longer-term strategic plus" for United Technologies and would improve its position in aerospace systems where it could cut costs.
There is the potential, however, for a close review of the deal by the Defense Department, von Rumohr said.
It is a natural fit for Lockheed Martin Corp., which is already the primary mission systems provider for Sikorsky's MH-60 Naval Hawk, Canadian Maritime Helicopter, Combat Rescue Helicopter and presidential helicopter, von Rumohr said.
The deal is targeted to close by the end of the year or in the first quarter of 2016.
There have been sale rumors for more than a year as the military business fell with the U.S. exiting Afghanistan and reducing its presence in Iraq. Sikorsky, which is also used by major energy companies to ferry workers to and from deep-water oil platforms and other facilities, has also come under strain with the price of oil plunging this year.
Hewson sees a recovery in energy prices and predicted that Sikorksy will add additional value with any rebound.
United Technologies announced in March that it was looking at whether spinning off Sikorsky would allow the company to better focus on "providing high-technology systems and services to the aerospace and building industries."
Sikorsky accounted for $7.45 billion of United Technologies' $65.1 billion in revenue last year.
Information for this article was contributed by Stephen Singer of The Associated Press and by Kenneth R. Gosselin, Kristin Stoller and Mara Lee of The Hartford Courant.
Business on 07/21/2015