Harris Corp. and L3 Technologies Inc. to merge in $33 billion deal

Harris Corp. and L3 Technologies Inc. said Sunday they will combine in the largest-ever defense industry merger, as the Pentagon expands budgets with an eye toward increased investment by contractors and quicker weapons development.

The two contractors agreed to a merger that will form one of the industry’s largest players, a $33.5 billion behemoth to challenge weapons makers such as Raytheon Co. and Northrop Grumman Corp. With product lines spanning communications and electronics, the newly formed L3 Harris Technologies Inc. is poised to capitalize on military spending increases under U.S. President Donald Trump.

“This looks to be a special transaction capable of catapulting both companies into the defense big league,” Carter Copeland, an analyst at Melius Research, said in a note Monday. “Years from now, most will view this deal as a turning point in the industry.”

The combination adds to a flurry of aerospace and defense deals fueled by higher government spending and a boom in jetliner sales. Boeing Co. last week closed its purchase of components distributor KLX Inc., a day before parts makers TransDigm Group Inc. and Esterline Technologies Corp. agreed to a $3.6 billion tie-up. Meanwhile United Technologies Corp. is poised to complete a $23 billion acquisition of Rockwell Collins Inc.

The companies said the enlarged entity would generate $3 billion in free cash flow within three years and $500 million in cost savings, of which $200 million would be returned to customers in the form of lower prices. They also earmarked as much as $2 billion for stock buybacks in the year after closing.

The latest merger would follow a string of aerospace and defense-industry combinations.

sources https://www.wsj.com | https://www.bloomberg.com