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CAE Inc. is approaching an agreement to buy the military training division of L3Harris Technologies Inc. for $ 1.05 billion, according to people familiar with the matter, in a move that would expand the company’s defense business. Canadian aerospace.
| Ticker | Safety | Last | Change | Change % |
|---|---|---|---|---|
| CAE | CAE | 26.47 | -0.50 | -1.85% |
| LHX | L3HARRIS TECHNOLOGIES, INC. | 181.62 | -5.46 | -2.92% |
| BA | THE BOEING CO. | 212.01 | -4.44 | -2.05% |
| RTX | RAYTHEON TECHNOLOGIES CORP. | 71.99 | -1.33 | -1.81% |
| LDOS | LEIDOS HOLDINGS INC | 88.45 | -0.68 | -0.76% |
A deal is expected on Monday, assuming the talks do not fall apart, people said.
The unit includes three main businesses: Link, which provides military training in the United States; Doss Aviation, which offers flight training for the United States Air Force; and AMI, which designs and manufactures simulator hardware. The company, which has an annual revenue of about $ 500 million, is expected to be headquartered in Tampa, Florida, after the deal closes, people said.
DEFENSE CONTRACTORS HARRIS, L3 TECHNOLOGIES TO MERGE
CAE, based in Saint-Laurent, Quebec, expects the deal to be an addition to earnings per share and foresees cost savings of about 35 million to 45 million Canadian dollars a year in the second year after closing, people said . It should be financed by a private placement of about C $ 700 million, equivalent to about US $ 549.4 million, from two institutional investors, they said.
CAE has a market value of around C $ 9.5 billion. It has historically specialized in flight simulators and training devices and has expanded its reach through several businesses in the past few months, although none of them comes close to the size of the business being discussed for the L3Harris unit.
CAE Inc. is approaching an agreement to buy the military training division of L3Harris Technologies Inc. for $ 1.05 billion, according to people familiar with the matter, in a move that would expand the company’s defense business. Canadian aerospace.
The Canadian company is a market leader in the training of pilots for commercial jets and manufactures flight simulators for the Boeing Co. 737 MAX and other jets, which has left it hard hit by the fall caused by the pandemic Covid-19 in global air travel.
CAE, which also produces health equipment such as ventilators, sought to expand and improve margins in its defense business, hiring two senior executives from L3Harris.
Melbourne-based L3Harris, which has a market capitalization of $ 38 billion, was formed by the 2019 merger of Harris Corp. and L3 Technologies Inc. It was at the time the largest defense industry merger of all time, with a transaction value of more than $ 15 billion. It was eclipsed by the combination of Raytheon Co. and United Technologies Corp. in 2020 to form Raytheon Technologies Corp.
The defense industry’s outlook improved during the pandemic, a reversal after years in which growth in aerospace commercial spending seemed more promising. Companies with much of their revenue dependent on commercial spending, including Boeing and its suppliers, have suffered from the drastic reduction in business and leisure travel.
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The sale of the military training business would lead L3Harris to meet its goal of disposing of assets responsible for up to 10% of sales and to use all resources to repurchase shares. It sold its airport security unit for $ 1 billion to Leidos Holdings Inc. last year, as well as to some smaller companies.
The L3Harris also has a division that trains jet pilots and builds flight simulators for the 737 MAX and other jets.
—Doug Cameron contributed to this article.