Harris Corp. announced that it reached an agreement to acquire Exelis Inc. in a deal estimated at $4.75 billion, creating the 11th biggest Federal contractor as the Pentagons budget stabilizes.
The Chief Executive Officer of Harris – Mr. William Brown said a statement: “The combination of the two companies’ highly complementary core franchises creates a competitively stronger company with significantly greater scale. We are expanding in a market where we have decades of success.”
The two companies revealed that the cash-and-stock offer for Exelis amounts to $23.75 per share and includes nearly $16.63 apiece in cash and 0.1025 share in Harris stock. After the transaction is finalized, Harris’s shareholders will hold a total of 85% in the combined company, while Exelis’ investors will own the remaining 15%.
Both companies’ boards unanimously approved the transaction. The acquisition is expected to be completed in June 2015.
The deal is expected to accelerate a process of further consolidation among medium-sized defence contractors in the U.S. Over the past half decade, defence companies have been avoiding large-scale transactions, mainly because of the sharp decline in Pentagon spending on new weapons and research. Harriss CEO Mr. Brown, who will also lead the new company, shared that he found the announced acquisition “transformational” and will expand scale and customer base in the two companies current markets.
In September 2014, Exelis revealed that it intends to focus on working in close collaboration with the U.S. Air Force and Navy, adding to the acquisitions value for Harris. Exelis manufactures antennas for military aircraft, sonar systems and GPS navigation systems and domes for Navy ships, and is also closely tied to NASA and NATO.
Harris Corp. surged by 9.63% to $76.18 per share on Friday in New York, marking a one-year change of +7.42%. The company is valued at $7.97 billion. According to CNN Money, the 5 analysts offering 12-month price forecasts for Harris Corp have a median target of $71.00, with a high estimate of $86.00 and a low estimate of $64.00. The median estimate represents a -6.80% decrease from the last price of $76.18.
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