Lockheed Martin boosts portfolio with $9bn Sikorsky acquisition

US defence manufacturer Lockheed Martin has made its biggest acquisition in 20 years after acquiring Sikorsky Aircraft for $9bn.

Lockheed Martin now own the famous Black Hawk and Marine One helicopter brands after reaching an agreement with rival defence company United Technologies to purchase its subsidiary, helicopter manufacturer Sikorsky Aircraft.

The acquisition is subject to customary conditions, including securing regulatory approvals, and is expected to close by late fourth quarter this year or early 2016.

The $9bn which Lockheed Martin paid to acquire Sikorsky Aircraft is effectively reduced to $7.1b (US), due to Lockheed Martin and United Technologies Corporation agreeing to make a joint election under Section 338 (h)(10) of the Internal Revenue Code which treats the transaction as an asset purchase for tax purposes.

The joint election therefore generates a tax benefit of $1.9b (US) for Lockheed Martin and its shareholders.

Lockheed Martin will now continue Sikorsky Aircrafts’ rich tradition of manufacturing military aircraft, with Sikorsky having made helicopters for the White House since 1958.

The US military has requested $1.6bn to buy 94 UH-60 Black Hawks in the 2016 fiscal year, following on from the Pentagon buying 70 Black Hawks in 2014 and 86 in 2015 for a combined total of $2.8bn.

Lockheed Martin will also take up a $1.24bn contract from the US Navy to build six new helicopters by 2020, a contract won by Sikorsky Aircraft last year.

Lockheed Martin will also make 21 helicopters for the US Navy by 2023 to replace the current Marine One fleet.

Lockheed Martin chairman, president and CEO,  Marillyn Hewson, said the acquisition of Sikorsky Aircraft would add to the companies growing portfolio of defence products.

“Sikorsky is a natural fit for Lockheed Martin and complements our broad portfolio of world-class aerospace and defence products and technologies,” she said.

“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.”

Lockheed Martin currently employs 112,000 people worldwide and had net sales of $45.6b (U.S) in 2014.

The defence company plans to conduct a strategic review of alternatives for its government IT and technical services businesses.