Lockheed Martin acquiring Sikorsky Aircraft from UTC for $9 bn

US defence contractor Lockheed Martin yesterday struck a deal to buy Sikorsky Aircraft from United Technologies Corp's (UTC), for $9 billion.

Lockheed said the net cost of the Sikorsky deal was around $7.1 billion, taking into account tax benefits resulting from the transaction. The deal is expected to close by late fourth quarter 2015 or early first quarter 2016.

"Sikorsky is a natural fit for Lockheed Martin and complements our broad portfolio of world-class aerospace and defense products and technologies," Lockheed CEO, Marillyn Hewson said in a statement.

UTC expects to use the proceeds from the sale to fund $8.3 billion more share buybacks to offset the earnings from the divesture of Sikorsky.

Exiting the helicopter business will allow UTC to better focus on providing high-technology systems and services to the aerospace and building industries and to deliver improved and sustained value to our customers and shareowners," UTC CEO, Gregory Hayes said in a statement.

The acquisition is the biggest by Lockheed since its $10-billion purchase of Martin Marietta in 1995, and also the biggest aerospace purchase after the 2012 acquisition of Goodrich by UTC for more than $16 billion.

UTC, the Connecticut-based aerospace and industrial giant, had last month said after conducting a strategic review, it has decided to either spin off or sell Sikorsky.

UTC's decision to sell Sikorsky comes amidst demand for helicopters weakening due to falling oil prices that have led to cost cutting in the oil and gas industry, as well as the US government scaling down the defence budget.

A deal with Sikorsky would see Lockheed further strengthening its position as the world's largest defence contractor, but may face intense scrutiny from the US Defense Department and anti-trust regulators, whose aim would be to maintain competition among defence contractors.

Some analysts opine that the US regulators may approve the deal since Lockheed does not make helicopters itself and plans to align Sikorsky under the Lockheed Martin Mission Systems and Training (MST) business segment.

MST and Sikorsky currently partner on a number of critical programs, including the VH-92 Presidential Helicopter, Combat Rescue Helicopter and the Naval MH-60 Helicopter.

Founded in Long Island, New York by Russian immigrant aircraft designer Igor Sikorsky in 1925, Sikorsky is the leading manufacturer of military and commercial helicopters.

Sikorsky helicopters are used by all branches of the US armed forces, along with military services and commercial operators in 40 nations.

Core US military production programmes are based on the Sikorsky H-60 aircraft, the Black Hawk helicopter for the US Army and Seahawk helicopter for the US Navy.

Over the past five years, the Pentagon has awarded $18 billion for Sikorsky helicopters, parts and services, making the company the leading rotorcraft provider to the US defence.

The Stratford, Connecticut–based company has more than 15,000 employees and posted sales of $7.5 billion last year.

Sikorsky has a joint venture in India with Tata Advanced Systems for producing S-92 helicopter cabins and more than 5,000 aerospace components at two manufacturing facilities in Hyderabad.

Based in Bethesda, Maryland, Lockheed Martin is a global security and aerospace company manufacturing F-35 fighter jets, naval ships and high-end government satellites.

The company  employs around 112,000 people posted net sales of $45.6 billion last year.