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By Svea Herbst-Bayliss
(Reuters) - Billionaire investor William Ackman's activist hedge fund Pershing Square Capital Management LP is opposing United Technologies Corp's planned $120 billion aerospace merger with defence contractor Raytheon Co, a person familiar with the matter said on Tuesday.
The move makes Ackman the first major Wall Street figure to come out against the deal. On Monday, U.S. President Donald Trump expressed concerns over the merger's impact on competition, though he also said he hoped the deal would happen.
Ackman wrote an email to United Technologies CEO Greg Hayes early on Sunday morning to express his concerns about the proposed deal after reading press reports about it, the source said.
The fund manager, whose firm owns roughly 0.67% of United Technologies, had previously supported the company in its plans to split into three businesses - aerospace, Otis elevators and Carrier air conditioners.
"We are extremely concerned that such a transaction will significantly lower the business quality of pro-forma United Technologies' aerospace business, and, to make matters worse, will be accomplished through the highly dilutive issuance of large amounts of United Technologies stock," Ackman's email, seen by Reuters, said.
A spokesman for Pershing Square declined to comment. Raytheon did not immediately respond to requests for comment.
"We are confident that our shareholders will see the merits of this transaction and the value it brings to them and the company. We will be working diligently in the days and weeks ahead to make sure that the details of the transaction are presented to and fully understood by all shareholders," United Technologies said in a statement.
The Wall Street Journal first reported on Pershing Square's opposition to the deal.
Activist hedge fund Third Point LLC also has a stake in United Technologies. Like Pershing Square, it supported the company's break-up, but its views on the Raytheon deal are not known. A Third Point spokeswoman did not respond to a request for comment.
The merger would reshape the competitive landscape by forming a conglomerate which spans commercial aviation and defence procurement. United Technologies provides primarily commercial plane makers with electronics, communications and other equipment, whereas Raytheon mainly supplies the U.S. government with military aircraft and missile equipment.
United Technologies and Raytheon shares have dropped 7% and 4.5% respectively since their deal was announced, as investors expressed disappointment with the low value of synergies the companies announced. Investors also fret that major clients of the companies such as the Pentagon would seek to review their supply chains.