Lockheed to buy Sikorsky for $9 billion; reviews options for IT business

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Lockheed Martin to Acquire Helicopter Maker Sikorsky Aircraft

Lockheed Martin Corp (LMT.N) said Monday it would buy Sikorsky Aircraft, the helicopter unit of United Technologies Corp (UTX.N), for $9 billion, and would review the possible sale or spinoff of $6 billion in other information technology and services businesses.

The Pentagon's largest supplier said the net cost of the Sikorsky deal was around $7.1 billion, taking into account tax benefits resulting from the transaction. Lockheed also reported higher earnings and revenue for the second quarter..

The deal cements Lockheed's dominance in weapons making and opens key new foreign markets for the company, which dwarves its nearest competitors, the defense business of Boeing Co (BA.N) and Northrop Grumman Corp (NOC.N).

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

Lockheed, which makes F-35 fighter jets, naval ships and high-end government satellites, said the purchase would have no impact on its commitment to return cash to shareholders through dividends and to reduce outstanding share count to below 300 million shares by the end of 2017.

See photos of Sikorsky's helicopters:

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Lockheed to buy Sikorsky for $9 billion; reviews options for IT business
A UH-60 Black Hawk helicopter sits mounted in front of the United Technologies Corp. Sikorsky helicopter plant in Stratford, Connecticut, U.S., on Monday June 15, 2015. United Technologies Corp. said it has decided to go ahead with plans to unload its Sikorsky Aircraft business and will decide between a spinoff and an outright sale by the end of the third quarter. Photographer: Douglas Healey/Bloomberg via Getty Images
FILE - In this Sunday, Sept. 4, 2011, file photo, a Black Hawk helicopter of the U.S. Army's Task Force Lift "Dust Off," Charlie Company 1-71 Aviation Regiment, returns from a mission at Forward Operating Base Edi in the Helmand Province of southern Afghanistan. Lockheed Martin Corp. said Monday, July 20, 2015, that it is buying Black Hawk helicopter maker Sikorsky Aircraft for $9 billion. (AP Photo/Rafiq Maqbool, File)
This is an undated photo of a Pan American Airways S-43 Sikorsky Amphibian flying boat at an unknown location. (AP Photo)
New York Gov. Andrew Cuomo and other State Lawmakers fly in a New York National Guard Sikorsky Blackhawk UH-60 helicopter during a flight touring flood damaged areas in Binghamton and the Southern Tier from the Greater Binghamton Airport in Johnson City N.Y., Friday, Sept. 9, 2011. (AP Photo/Hans Pennink)
Mechanics from the 309th Aerospace Maintenance and Regeneration Group boneyard prepare a U.S. Navy Sikorsky SH-60 Seahawk for storage after it's arrival, Friday, May 15, 2015 at Davis-Monthan Air Force Base in Tucson, Ariz. The "boneyard" is world’s largest military aircraft storage and preservation facility. (AP Photo/Matt York)
An Army Sikorsky VH-34s Choctaw helicopter once used to transport President Dwight D. Eisenhower sits in a field at the 309th Aerospace Maintenance and Regeneration Group boneyard Thursday, May 14, 2015 at Davis-Monthan Air Force Base in Tucson, Ariz. President Eisenhower became the first chief executive to be transported by helicopter. Presidents Eisenhower and John F. Kennedy were transported in VH-34 helicopters and VH-34's served as 'Army One' from 1958 through 1963. (AP Photo/Matt York)
A Sikorsky VH-3D Sea King with Marine Helicopter Squadron One (HMX-1) prepares to land at Miami International Airport, Wednesday, April 22, 2015, in Miami. (AP Photo/Wilfredo Lee)
Lebanese Minister of Interior Ziad Baroud checks a firefighting Sikorsky helicopter after its arrival in the tarmac at Rafik Hariri Airport in Beirut, Lebanon, Tuesday, June 2, 2009. Three Sikorsky helicopters were offered by the "Feu Vert" (green light) association - an association launched with the initiative of the Lebanese Minister of Interior Ziad Baroud - for the purpose of fire fighting and protecting the forests. (AP Photo/Hussein Malla)
Workers walk outside of Sikorsky Aircraft, in Stratford, Conn. Tuesday March 10, 2009, its parent company United Technologies Corp. will eliminate 11,600 jobs worldwide. United Technologies, saying the downturn in its core markets is worse than expected, cut its 2009 profit forecast 13 percent Tuesday and will reduce its global work force by 5 percent. (AP Photo/Douglas Healey).
The latest version of the Sikorsky UH-60M Black Hawk helicopter is seen at the Sikorsky Aircraft plant in Stratford, Conn., Monday, July 31, 206 at the start of the roll out ceremony. As many as 1,200 of the helicopters are projected to be built. (AP Photo/Bob Child)
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It said it repurchased 4.9 million shares for $937 million in the quarter, up from 0.8 million shares for $124 million in the year earlier period.

Lockheed said it would align Sikorsky under its mission systems and training business, which had already worked closely with Sikorsky on several helicopter programs.

The company expects to close the transaction by late in the fourth quarter of this year, or early in 2016, depending on regulatory approvals.

It said it would complete a strategic review of its government IT infrastructure services business and the technical services business within its missiles and fire control segment by the end of the year, units with about 17,000 employees.

The company will retain services businesses focused on defense and intelligence customers.

UTC said proceeds from the sale of its copter unit would fund more share buybacks to offset the earnings impact from the departure of Sikorsky. Its board authorized a share buyback of up to 75 million shares, which would be worth about $8.3 billion based on Friday's closing price, the company said.

"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 Chief Executive Greg Hayes said in a statement.

(Additional reporting by Lewis Krauskopf in New York and Sagarika Jaisinghani in Bangalore; Editing by Chizu Nomiyama and Bernadette Baum)

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