Raytheon (RTN) - Get Report and United Technologies  have announced an all-stock merger to form an aerospace and defense giant that will be known as Raytheon Technologies Corporation and expected to have $74 billion in pro forma 2019 sales. 

The deal that would combine Massachusetts-based defense contractor Raytheon with Connecticut-based aerospace company United Technologies "will offer a complementary portfolio of platform-agnostic aerospace and defense technologies," said Raytheon in a statement later on Sunday.

Otis and Carrier would not be included in the partnership, and the two are expected to be separated from United Technologies in the first half of 2020 as planned. Subsidiaries Collins Aerospace and Pratt & Whitney would be included.

"With a strong balance sheet and robust cash generation, Raytheon Technologies will enjoy enhanced resources and financial flexibility to support significant R&D and capital investment through business cycles," said Raytheon.

Owners of Raytheon shares will get about 2.3 shares in the combined company for each Raytheon share. Once the merger is completed, United Technologies shareholders will get about 57% and Raytheon shareholders will own about 43% of the combined company. The return of capital to shareholders is expected to be around $18 billion to $20 billion in the first three years of the merger, said Raytheon.

The deal is slated to close in the first half of next year, after United Technologies breaks off its Otis and Carrier businesses.

"Today is an exciting and transformational day for our companies, and one that brings with it tremendous opportunity for our future success. Raytheon Technologies will continue a legacy of innovation with an expanded aerospace and defense portfolio supported by the world's most dedicated workforce," said Tom Kennedy, Raytheon chief executive in a statement. "With our enhanced capabilities, we will deliver value to our customers by anticipating and addressing their most complex challenges, while delivering significant value to shareowners."

Greg Hayes, chief executive of United Technologies, would lead the new company and Kennedy would become executive chairman.