Activist investor Ackman says he opposes United Technologies-Raytheon deal

William Ackman, a big United Technologies Corp. shareholder who earlier pushed the industrial giant to streamline its business, is now urging the company to call off its planned megamerger with Raytheon Co., which he says makes no strategic sense.

The activist investor sent an email to United Technologies UTX, -3.96%  Chief Executive Greg Hayes early Sunday morning after The Wall Street Journal reported on the impending deal. He wrote that he was “extremely concerned” about the combination, according to a copy of the email seen by the Journal. The companies confirmed their plan to merge later Sunday.

The all-stock transaction would create an aerospace-and-defense giant, eclipsed in sales only by Boeing Co. and Airbus SE. The proposed takeover, which doesn’t include a premium for Raytheon shareholders, would take place after United Technologies completes a plan to spin off its Otis elevator and Carrier building-systems businesses in the first half of next year and become primarily an aerospace provider. The addition of Raytheon’s RTN, -5.11%  big defense franchise would create a company with a valuation exceeding $100 billion—assuming shareholders and regulators approve it.

Executives billed the deal as a merger of equals that would allow them to cut costs, share technology and protect against a slowdown in demand. Ackman begged to differ. It “makes no sense to us why you would consider a stock acquisition using today’s massively undervalued UTC common stock to buy a large business of inferior quality to the company’s existing businesses, and for which we cannot comprehend the strategic logic,” Ackman wrote. He added that if United Technologies followed through with the deal, Pershing Square would oppose it, publicly if needed, as would a “substantial majority” of other shareholders.

An expanded version of this report appears on WSJ.com.

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