Lockheed Martin Corporation (NYSE:LMT) is holding talks with United Technologies Corporation (NYSE:UTX) over the possibility of an acquisition that could be worth more than $8 billion.
The talks might lead to the Sikorsky helicopter unit changing ownership. Analysts expect the two companies to come to a solid agreement within the next few days. If the deal goes through, it will be the largest acquisition for Lockheed since it acquired Martin Marietta Corp. in a $10 billion deal more than 20 years ago.
Sikorsky makes the Black Hawk choppers, which are very popular. The division is mostly oriented towards military helicopters though it still makes commercial helicopters. The company’s biggest client is the Pentagon. The company also carries out maintenance contracts as well as providing aftermarket parts as a side business.
The acquisition might be a chance for United Technologies pledge in March to look for alternative strategies for the helicopter division. On the other side of the coin, this will be a strategic acquisition for Lockheed because it will be in line with its growth objectives. Lockheed has been unable to move forward over the past few years perhaps due to budget cuts. Sikorsky has also been having it rough. There has been less demand for the crafts especially by the military because the Iraq and Afghanistan wars have been on the low.
The unstable crude oil prices have also brought a negative impact to the helicopter division, the company’s military oriented choppers represent 70% of the total sales. However, the future is not as dark as it seems for Sikorsky. The company still has several contracts to supply military choppers. There is also one particularly important deal for the company to provide next generation presidential helicopters and additional rescue mission helicopters for the military.
Boeing Co (NYSE:BA) and Textron Inc. (NYSE:TXT) were among the other firms that had submitted their bid to acquire the helicopter business. Further details about the deal are expected to be released in the coming few days.
