Lockheed Martin has emerged as the successful bidder for Sikorsky in a US$9.0 billion deal that will see the world’s biggest military helicopter manufacturer join the fold of the world’s biggest defence contractor.
“Sikorsky is a natural fit for Lockheed Martin and complements our broad portfolio of world-class aerospace and defence products and technologies,” Marillyn Hewson, Lockheed Martin’s chairman, president and CEO, said in a statement.
“I’m confident this acquisition will help us extend our core business into the growing areas of helicopter production and sustainment. Together, we’ll offer a strong portfolio of helicopter solutions to our global customers and accelerate the pace of innovation and new technology development.”
Sikorsky could prove a good fit for Lockheed Martin as the two companies already cooperate on the MH-60R Seahawk ‘Romeo’ (24 of which are being delivered to the Royal Australian Navy) and the VH-92 presidential helicopter programs. While Lockheed Martin has not said if it will retain the Sikorsky name, it has said it will place the helicopter manufacturer within its Mission Systems and Training (MST) business unit, which already works with Sikorsky on the Romeo and VH-92, and not its Aeronautics division, which builds the F-35 and F-16 fighters and the C-130J transport.
Lockheed Martin says the deal, which will effectively cost it US$7.1 billion after tax benefits, should be completed by the end of the year or in early 2016.
The acquisition will also increase the size of Lockeed Martin’s Australian footprint. Lockheed Martin and Sikorsky are joint venture partners in MHSCo – Maritime Helicopter Services Company – which is based at Nowra to provide through-life support for the RAN’s MH-60R fleet, while Brisbane-based Sikorsky Helitech is a fully-owned subsidiary of Sikorsky Aerospace Services and provides maintenance, repair and overhaul services for Sikorsky helicopters in the region.
Sikorsky-built helicopters in Australia include the Navy’s new Romeos and retiring S-70B-2 ‘classic’ Seahawks, the Army’s S-70A-9 Black Hawks, and civil S-76 and S-92 helicopters used by commerical operators, predominantly in support of the oil and gas sector. (Sikorsky builds the MH-60R’s airframe with Lockheed Martin responsible for mission system integration.)
Sikorsky parent company United Technologies Corporation had announced that it would divest Sikorsky a little over a month ago on June 15.
“Our strategic review has confirmed that exiting the helicopter business is the best path forward,” UTC president and chief executive Greg Hayes said at the time. Promoted to CEO of UTC in November, Hayes soon after launched a strategic review into the future of Sikorsky.
The UTC chief said that the “separation of Sikorsky from the portfolio will allow both United Technologies and Sikorsky to better focus on their core businesses. Over the coming weeks, we’ll determine whether a spinoff or direct sale is the best way to enhance Sikorsky’s long-term success and create the most value for customers and shareholders.”
With annual revenues of US$7.5 billion, Sikorsky is the smallest of UTC’s four business divisions, about half the size of its Pratt & Whitney engine business and its Aerospace Systems unit (which comprises Goodrich and Hamilton Sundstrand), and about a quarter of the size of the company’s Building & Industrial Systems division (which includes Otis, Carrier and Chubb).
Sikorsky has been hit by weakening oil and gas production, which has seen a fall in commercial sales. Sales of Sikorsky’s military products, which account for around 70 per cent of the company’s business, are also down on the back of the US military reducing its spend on modernising its helicopter fleets.
Meanwhile, Lockheed Martin has announced it will undertake “a strategic review of alternatives for its government IT and technical services businesses, primarily in the Information Systems & Global Solutions business segment and a portion of the Missiles and Fire Control business segment”. Divesting its government and commercial IT business and acquiring Sikorsky suggests Lockheed Martin is taking a renewed focus on defence and aerospace as its core business.