Harris Corporation (NYSE:HRS) today announced a definitive agreement under which an affiliate of Veritas Capital, a leading private equity investment firm, will acquire Harris’ government IT services business for $690 million in cash. Proceeds from the transaction will be used to support the company’s capital allocation strategy, including pension pre-funding and share repurchases. The transaction is subject to regulatory review and other customary closing conditions and is expected to close before the end of fiscal 2017.
Headquartered in Herndon, Virginia, the business provides IT and engineering managed services to U.S. government agencies, including supporting NASA’s Space Communications Network and Deep Space Network programs, and operates within the company’s Critical Networks segment. Harris expected approximately $1.07 billion in fiscal 2017 revenue attributable to the business. Harris’ air traffic management franchise, primarily serving the FAA, is not part of the divestiture and will remain with Harris.
“Today’s announced divestiture, coupled with the recent sale of CapRock, reflects our strategy of optimizing the business portfolio to create shareholder value,” said William M. Brown, chairman, president and chief executive officer. “These divestitures sharpen Harris’ focus on growing core franchises where technology is a key differentiator, providing compelling value to our customers.”
Current and prior period financial results for the divested businesses will be reported as discontinued operations, beginning in fiscal 2017’s second quarter for CapRock and third quarter for the government IT services business. The company expects to benefit from the use of cash proceeds and restructuring actions related to the two divestitures, resulting in fiscal 2018 net dilution in a range of $0.10 to $0.15 per diluted share.
In connection with the announcement, Harris’ air traffic management business will now operate as part of the company’s Electronic Systems segment. As a result, Harris will have three business segments with no changes to its Communication Systems or Space and Intelligence Systems segments.
Source: Harris Corporation (NYSE: HRS)
Date: Jan 27, 2017