The Justice Department said Thursday that United Technologies and Raytheon must divest Raytheon's military airborne radios business, UTC's military global positioning systems and UTC's large space-based optical systems businesses to move forward with the companies' planned merger.
"Without these divestitures, the merger would eliminate competition between two of the primary suppliers of military airborne radios and military GPS systems to the Department of Defense (DOD), and enable the merged firm to lessen competition for multiple components used in reconnaissance satellites sold to DOD and the wider U.S. intelligence community," DOJ said in its statement.
In January, BAE Systems said it had reached agreements to acquire Collins Aerospace's military GPS business and Raytheon's airborne tactical radio business.
The Justice Department said it has filed a civil antitrust lawsuit to block the proposed merger and filed a proposed settlement that, if approved by the court, would resolve the issues raised in the lawsuit.
"According to the department's complaint, UTC and Raytheon are the only firms that develop, manufacture, and sell military airborne radios, which allow for secure voice, data, and video communications to and from aircraft, and are installed on every airplane and helicopter currently used by DOD," DOJ said. "The department's complaint also alleges that UTC and Raytheon are the only competitors for military GPS systems for aviation and maritime applications, and are two of the three competitors for military GPS systems for ground applications."
"The complaint alleges that the merger would eliminate competition between UTC and Raytheon for all of these products, likely leading to higher prices, diminished innovation, lower quality, and less favorable contract terms," the agency continued.
Additionally, the Justice Department said its complaint claims UTC and Raytheon are "among the few firms" able to produce several parts for space-based electro-optical/infrared (EO/IR) reconnaissance satellites.
"Specifically, UTC is one of only two companies able to build large space-based optical systems, and Raytheon is a leading supplier of detectors called focal plane arrays," the agency said. "Raytheon is the only firm that produces FPAs that detect visible light, and one of two firms that produces FPAs that detect infrared light."
Under the terms of the settlement, Raytheon and UTC must divest the airborne radios business and military GPS business to BAE or "an alternate acquirer approved by the United States."
"The proposed settlement further requires the parties to divest UTC's optical systems business, including a facility in Danbury, Connecticut, to an acquirer to be approved by the United States," the department added.