In what will be one of the largest mergers in defense electronics history, Harris Corp. and L3 Technologies have agreed to a transformational all-stock merger of equals. The resulting combined company, L3 Harris Technologies, will be the sixth largest U.S. defense contractor, with 48,000 employees worldwide and about $16 billion in annual revenues. With customers in more than 100 countries around the world, the new combined company—to be headquartered in Melbourne, Fla.—would be ranked about 180th on the latest Fortune 500 list of top worldwide companies. The two businesses are largely complementary, merging into a global defense technology leader with a wide range of capabilities.
The merger agreement was unanimously approved by the boards of directors of both companies. L3 shareholders will receive a fixed exchange ratio of 1.30 shares of Harris common stock for each share of L3 common stock, consistent with the 60-trading-day average exchange ratio of the two companies. Upon completion of the merger, Harris shareholders will own approximately 54% and L3 shareholders will own approximately 46% of the combined company on a fully diluted basis. The combined company is expected to generate earnings before interest and taxes (EBIT) of $2.4 billion and free cash flow of $1.9 billion.
“This transaction extends our position as a premier global defense technology company that unlocks additional growth opportunities and generates value,” said William M. Brown, president and CEO of Harris Corp.
“This merger creates greater benefits and growth opportunities than either company could have achieved alone,” concurred Christopher E. Kubasik, chairman, president, and CEO of L3. “The companies were on similar growth trajectories, and this combination accelerates the journey to becoming a more agile, integrated and innovative non-traditional 6th Prime focused on investing in important, next-generation technologies.
“L3 Harris Technologies will possess a wealth of technologies and a talented and engaged workforce,” he continued. “By unleashing this potential, we will strengthen our core franchises, expand into new and adjacent markets and enhance our global presence.”
The combined company will have a 12-member board of directors, drawing six board members from each of the formerly separate companies. Brown will serve as chairman and CEO, while Kubasik will serve as the vice chairman, president, and COO for the first two years following the closing of the transaction. For the third year following the merger, Brown will transition to executive chairman and Kubasik to CEO, after which Kubasik will become chairman and CEO.