Defense giant Raytheon and industrial conglomerate United Technologies agreed to a merger, the companies announced.

Under the deal, Raytheon shareowners will receive 2.3348 shares in the combined company for each Raytheon share, giving them about 43% of the merged company.

The new company, which will be named Raytheon Technologies Corp., would have about $74 billion in annual sales and be second only to Boeing in the United States in terms of annual revenue.

“The combination of United Technologies and Raytheon will define the future of aerospace and defense,” United Technologies chairman and chief executive officer Greg Hayes said in a statement.

Hayes would become chairman and CEO of the new company two years after the merger closes. Raytheon chairman and CEO Tom Kennedy would be executive chairman.

The companies said the merger would produce more than $1 billion of gross annual cost synergies by year four and return $18 billion to $20 billion in capital to shareholders in first 36 months.

Last November, United Technologies announced that it was spinning off its Otis elevator division and Carrier building systems unit to help it focus on its aerospace business. The companies said they expected that process to be finished by the time the merger closes in the first half of 2020.

The companies said Raytheon will consolidate its operations under the new deal into four industries, with one based on intelligence and aerospace and another based on defense and missile systems.

The new headquarters would be in the metro-Boston area. Raytheon is currently based in Waltham, Massachusetts. United Technologies is based in Farmington, Connecticut.

Citigroup Global Markets is acting as financial adviser to Raytheon and RBC Capital Markets provided a fairness opinion. Morgan Stanley, Evercore, and Goldman Sachs are acting as financial advisers to United Technologies.

Raytheon shares were up more than 1.5% in afternoon trading Monday. United Technologies shares were down nearly 2%.