Content area
Full text
Raytheon yesterday said that it would buy Texas Instruments' Defense Systems & Electronics business in a $2.95 billion transaction to position Raytheon as a $15 billion defense electronics powerhouse capable of holding its own against a dwindling number of industry giants.
"Raytheon and E-Systems and Texas Instruments' combined electronics {have} $8 billion in revenues {and} we are clearly a powerhouse in defense electronics; second only to Lockheed Martin- Loral in terms of defense electronics business and we think that represents opportunities for the total company," Peter D'Angelo, Raytheon's chief financial officer, told reporters and analysts during a telephone conference call yesterday. "What we are doing is broadening what we do in defense electronics in some very meaningful ways to get to more customers,"
The Lexington, Mass.-based Raytheon beat a number of competing bids to acquire TI's Lewisville, Texas-based defense and electronics business in a cash deal that would create a new Raytheon subsidiary called Raytheon TI Systems with broad capabilities in missiles, night vision, and command, control and reconnaissance systems. Two New York City investment houses are overseeing the buy, Bear, Stearns & Co. for Raytheon and Morgan Stanley for TI.
"Our strategy has been, and continues to be, where we are involved, we are leaders as top tier players. This acquisition clearly strengthens our position as a top tier player in defense," D'Angelo added. The union between the two is complementary in nature, ensuring little overlap in capabilities, and is expected to realize a growth rate of between 5 and 10 percent over the coming years, he said.
The proposed deal, which must be reviewed by the federal government for possible antitrust violations, has been approved by both companies' boards and is expected to be concluded by March. While the deal saddles Raytheon with considerable debt--totaling about $6.6 billion--D'Angelo stressed that the burden is manageable because of Raytheon's strong cash flow, allowing the company to pay off TI's $3 billion cost within five years, should the company chose to do so.
In the proposed deal, Raytheon would gain TI's extensive precision-guided weapon, night vision and electronics programs, including the Paveway III laser-guided bomb, the Joint Standoff Weapon, the Improved Target Acquisition System, a piece of the lucrative Javelin antitank missile system joint venture...