That's because if the deal can pass muster with U.S. Justice Department antitrust regulators, you'll have a much more valuable aerospace-and-defense business than United Technologies' current split-up plan would give you. And if the deal fails to pass muster (something that's certainly possible given you're merging two of the country's biggest defense contractors) it stands to reason UTX stock of will return to the higher price than it should be at Monday's opening.
I like UTX very much, but I think that the break-up plan will create a tremendous amount of additional value. The company's climate-control business has great prospects and is performing at a level never seen before. However, United Tech's Otis elevator/escalator business is more problematic. Much of its growth comes from China, but Otis has been in the China crosshairs ever since the U.S.-Chinese trade war began.
So, a UTX merger with Raytheon would give the aerospace-and-defense business even more heft -- and less exposure to U.S. defense-budget issues. That matters, because the reason Raytheon's stock has been stalled for so long is a belief that defense spending has peaked for this cycle.
In fact, Raytheon has had a series of problematic quarters. The company has repeatedly beaten analyst expectations, but hasn't raised guidance in a way that pleases Wall Street. We fought that negativity for several quarters at ActionAlertsPlus.com, but then gave up.
One of the reasons we gave up is that we didn't think anyone could ever buy Raytheon without triggering antitrust issues. Yes, the merger of Harris (HRS) and L3 Technologies (LLL) got through, but those are much smaller companies. Still, that combination shows you the potential upside from the Raytheon/United Technologies tie-up.