Merger would create the world’s sixth-largest contractor in aerospace/defense and critical communications

Critical communications and aerospace/defense company Harris and aerospace and defense company L3 Technologies plan to merge their businesses and create a new company that will be the sixth-largest aerospace, defense and critical communications contractor in the world.

The transaction is expected to close in mid-2019; the new company, L3 Harris Technologies, will be headquartered in Melbourne, Florida, where Harris is currently headquartered.

The two companies are describing the proposed transaction as a “merger of equals” that are highly complementary to each other. L3 has about $10 billion in annual revenues and about 31,000 employees; Harris has about $6 billion in annual revenues and around 17,000 employees. About $1.8 billion of Harris’ annual revenues come from its communications systems segment, which includes the public safety market. According to information provided by Harris, about 57% of the combined L3 Harris’ business would be with the U.S. Department of Defense, with 13% in the commercial market and 13% with other U.S. government agencies.

Harris’ current president, CEO and chairman Bill Brown would take the position of chairman and CEO for Le Harris, with L3’s Chairman, CEO and President Chris Kubasik to serve as vice chairman, president and COO. Kubasik would move into the CEO position after two years, the two companies said, and the chairman role after three years.

Harris reports strong growth

Meanwhile, Harris just announced some of its best quarterly performance in years, driven by growth in both the global defense market and in critical communications.

Revenues were up 9% year-over-year to $1.5 billion, while net income jumped 34% compared to the same time last year and reached $213 million.

“We are off to a strong start in fiscal 2019 with solid first quarter results and the highest revenue and EPS growth we have achieved in eight years,” said Brown in a statement.

Harris saw growth across all three of its business units — communications systems, electronic systems and space and intelligence systems — but the strongest growth was in its communications systems, with revenues of $469 million, up 16% from the year-ago period. Harris said it saw double-digit growth in all of its three communications systems segments, including public safety communications. The public safety unit won more than $120 million in awards in the utility market as well as state, local and federal agencies, according to Harris, including more than $40 million from Nevada Energy and Washoe County, Nevada to design and build a statewide shared radio system.

Harris’ electronic systems unit also won a five-year, $1.4 billion contract extension to continue providing  critical voice and data communications for National Airspace System operations at more than 4,400 Federal Aviation Administration, U.S. Department of Defense and National Weather Service facilities, the company said.

“Over the past few years, we have executed well against our strategic priorities, reshaping our portfolio to focus on technology differentiated businesses and returning to growth,” Brown said. ” The transformative merger of equals announced today will enable us to increase our scale, strengthen our core businesses and extend our position as a premier global defense technology company.”

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