Melbourne, Florida-based Harris Corp. and information technology company and defense contractor rival Exelis Inc. have signed an acquisition agreement last week. The sale will amount to about $4.75 billion when complete, probably mid-year, said B.J. Talley, Exelis director of corporate communications.
Together, Exelis and Harris generated a combined $8 billion in revenue last year.
The Exelis Mission Systems division had its headquarters in Colorado Springs. In September, that division spun-off to create Vectrus, Inc. in Colorado Springs. Vectrus provides engineering, logistics and security support for the U.S. military.
The effect of the sale is unclear to Exelis operations in the Springs. A woman who answered the phone at the company’s Centennial Boulevard location said she does not know what impact the sale will have.
The 700 Exelis employees in Colorado Springs will operate “business as usual,” Talley said. “Decisions regarding personnel and facilities will be made as the process moves forward. The Exelis operations here center on information systems business, engineering and network operations.
Under the terms of the deal, which has been approved by both sides’ boards of directors, Exelis shareholders will receive about $16.63 in cash and 0.1025 of a share of Harris common stock for each Exelis share they own. Based on the Thursday closing price of Harris common stock, those numbers come out to around $23.75 per share, or a $4.75 billion equity value, according to a joint statement Friday.
Upon the deal’s completion — it’s expected to close in June — Harris shareholders will own about 85 percent of the combined company, with Exelis shareholders holding the remaining 15 percent.
Harris President and CEO William M. Brown called the acquisition of Exelis “transformational.
“The combination of the two companies’ highly complementary core franchises creates a competitively stronger company with significantly greater scale,” Brown said. “We are expanding in a market, where we have decades of success and a workforce dedicated to providing our customers with innovative and cost-effective solutions for some of their most complex challenges.”
Together, Harris and Exelis boast roughly 23,000 employees throughout the world, including 9,000 engineers and scientists. Both companies are well-known for providing entities such as the U.S. Army, Canadian Armed Forces and Lockheed Martin with tactical radios, cyber network operations, security support services and more.
Exelis President and CEO David F. Melcher called the merger an “exciting new chapter.
“Combining the companies not only creates shareholder value, but the commitment to excellence and innovation that both companies share will significantly benefit customers and provide new opportunities for employees,” Melcher said.
The deal is expected to be “slightly accretive” to Harris in the first full year after closing, the companies said, and will become exponentially more accretive as the years go on. Due to consolidation, plus the elimination of certain costs, the merger could save Harris between $100 million and $120 million by year three.
Harris said it secured $3.4 billion of fully committed bridge financing from Morgan Stanley Senior Funding Inc.