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Lockheed Martin Buying Helicopter Maker Sikorsky in $7.1B Deal

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Lockheed Martin Corp., the world’s biggest defense contractor, is about to get even bigger after buying helicopter maker Sikorsky from United Technologies Corp. in a deal worth 7.1 billion after “taking into account tax benefits resulting from the transaction.”

It will be Lockheed’s biggest acquisition since 1995, when it merged with Martin Marietta in a deal valued at $10 billion.

For United Technologies, it’s the end of a 70-year relationship with the helicopter pioneer, maker of the iconic Black Hawk choppers used by the U.S. military (read more about the strategy of new CEO Greg Hayes here). It’s also a reaction to falling margins driven by cuts in the defense budget and, more seriously over the last year, a sharp drop in civil orders from the oil and gas industry. Oil companies have slashed investment spending in response to the 50% drop in oil prices since last summer.

Sikorsky had said in the spring that its first-quarter operating profit fell 11% on a 7% decline in sales. Operating margins fell to 3% last year from over 6% in 2013. The company has already announced plans to shrink the number of its facilities, cutting 1,400 jobs in the process.

The agencies reported that the deal isn’t likely to face too much pressure from antitrust authorities, as Lockheed doesn’t currently make helicopters itself, so the Department of Defense isn’t likely to suffer any reduction on competition for further contracts.

Reuters said that Textron Inc., the parent company of Bell Helicopter, had dropped out of the bidding for Sikorski due to price concerns. United had needed a high price because it faces a chunky tax bill, given that the value of Sikorsky has risen so much since United bought it.

Read next: This Is the Surprising Way the Iranian Military Responded to the Nuclear Deal

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