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By Vago Muradian
L-3 Communications (LLL) yesterday said it would buy for $1.13 billion Raytheon's (RTN) Aircraft Integration Systems (AIS) unit, markedly boosting L-3's profile as a full-service contractor for special mission electronics found on virtually every U.S. surveillance aircraft program from U-2 spyplanes to unmanned aerial vehicles (UAV), according to executives and analysts.
"It's the largest and most significant acquisition we have made in the last four years of our life," L-3 Chairman and CEO Frank Lanza told Defense Daily. "In Afghanistan, we are seeing a new kind of war that puts greater focus on intelligence, surveillance, reconnaissance and communications to make the shooters we have, better. Everything AIS does is in the heart of that market, a market that will be growing, and they have some great homeland security stuff that they have not been able to talk about, but will be made public within the next 30 days. Our existing products have been central to the success of the campaign in terms of linking everyone together, but AIS will give us the processing and sensor capabilities we don't have. So with AIS, we will be able to play as a major sub, but we are not interested necessarily in competing against the primes or going after the platforms. We're a merchant supplier, we're proud of that, and we want to stay a merchant supplier."
AIS--which was E-Systems before Raytheon bought the business in 1995--would become the 20th transaction that over the past four years have transformed L-3 from a $525 million collection of 10 units spun off by Lockheed Martin (LMT) into a $3.5 billion firm that is one of the nation's leading defense electronics companies specializing in secure communications, sensors, digital data recording, and shipboard power systems. Late last year, L-3 secured a majority stake and assumed operational control of Canada's Spar Aerospace, one of the country's leading aerostructures makers, in a $100 million deal that Lanza said dovetails with AIS' operation. L-3 beat rival bids from Northrop Grumman (NOC) and the North American subsidiary of Britain's BAE SYSTEMS for the right to acquire AIS, sources said.
The AIS deal--which L-3...