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L3Harris (LHX) to Sell Antenna & Related Business for $200M
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L3Harris Technologies Inc. (LHX - Free Report) recently announced that it has signed an agreement to divest its antenna and related businesses for $200 million to an affiliate of Kanders & Co., Inc. Once the deal gets completed, L3Harris will earn cash worth $175 million.
The transaction is anticipated to close in the second quarter of 2024.
The businesses that L3Harris has agreed to sell specialize in a range of airborne and ground-based antennas and test equipment.
Rationale Behind the Sale
L3Harris’ decision to divest antenna’s operations underscores its commitment to reshaping its portfolio by getting rid of its non-core assets. The sale proceeds from this transaction will also help L3Harris in fulfilling its long-term capital deployment strategies.
The latest divestment agreement also seems to be a strategically prudent decision by L3Harris as it remains focused on repaying its debt associated with the acquisition of Aerojet Rocketdyne, which was completed in July 2023 for a net purchase price of $4.72 billion.
In line with this strategy, in November 2023, the company announced that it has agreed to divest the CAS disposal group, which includes both the Commercial Training Solutions and Commercial Aviation reporting units.
With L3Harris’ primary capital deployment priorities involving a focus on debt repayment, which can be potentially accelerated through proceeds from non-core asset divestitures, we may expect the company to sign more such divestiture deals for its non-core assets in the coming days.
Peer Moves
Defense companies often engage in acquisitions, mergers as well as divestments to improve economies of scale as consolidations tend to expand and strengthen the product portfolio, while divestments help focus on their core business structure and improve capital allocation. A few such companies have been discussed below.
Airbus Group (EADSY - Free Report) : On Mar 25, 2024, Airbus Defence and Space entered into an agreement to acquire INFODAS. With the acquisition, Airbus will be able to strengthen its cybersecurity portfolio for the benefit of its customers.
EADSY boasts a long-term (three-to-five years) earnings growth rate of 12.4%. The Zacks Consensus Estimate for 2024 sales implies a 9.5% improvement over the previous year.
Triumph Group (TGI - Free Report) : On Mar 1, 2024, Triumph Group completed the sale of its Product Support business to AAR Corp. for $725 million. The divestiture will enable TGI to strengthen its balance sheet and focus on the OEM component, spares and IP-based aftermarket business.
TGI boasts a long-term earnings growth rate of 2.6%. Its share price has surged 31.2% in the past one year.
BAE Systems (BAESY - Free Report) : On Feb 16, 2024, BAESY completed the acquisition of Ball Corporation’s unit, Ball Aerospace, for $5.5 billion. Through this acquisition, BAE Systems will be able to expand into highly attractive markets like military and civil space, C4ISR and missiles and munitions.
BAESY boasts a long-term earnings growth rate of 12.9%. The Zacks Consensus Estimate for 2024 sales implies a 34.1% improvement over the previous year.
Price Performance
In the past year, shares of L3Harris have gained 4.9% against the industry’s 14.9% decline.
Image: Bigstock
L3Harris (LHX) to Sell Antenna & Related Business for $200M
L3Harris Technologies Inc. (LHX - Free Report) recently announced that it has signed an agreement to divest its antenna and related businesses for $200 million to an affiliate of Kanders & Co., Inc. Once the deal gets completed, L3Harris will earn cash worth $175 million.
The transaction is anticipated to close in the second quarter of 2024.
The businesses that L3Harris has agreed to sell specialize in a range of airborne and ground-based antennas and test equipment.
Rationale Behind the Sale
L3Harris’ decision to divest antenna’s operations underscores its commitment to reshaping its portfolio by getting rid of its non-core assets. The sale proceeds from this transaction will also help L3Harris in fulfilling its long-term capital deployment strategies.
The latest divestment agreement also seems to be a strategically prudent decision by L3Harris as it remains focused on repaying its debt associated with the acquisition of Aerojet Rocketdyne, which was completed in July 2023 for a net purchase price of $4.72 billion.
In line with this strategy, in November 2023, the company announced that it has agreed to divest the CAS disposal group, which includes both the Commercial Training Solutions and Commercial Aviation reporting units.
With L3Harris’ primary capital deployment priorities involving a focus on debt repayment, which can be potentially accelerated through proceeds from non-core asset divestitures, we may expect the company to sign more such divestiture deals for its non-core assets in the coming days.
Peer Moves
Defense companies often engage in acquisitions, mergers as well as divestments to improve economies of scale as consolidations tend to expand and strengthen the product portfolio, while divestments help focus on their core business structure and improve capital allocation. A few such companies have been discussed below.
Airbus Group (EADSY - Free Report) : On Mar 25, 2024, Airbus Defence and Space entered into an agreement to acquire INFODAS. With the acquisition, Airbus will be able to strengthen its cybersecurity portfolio for the benefit of its customers.
EADSY boasts a long-term (three-to-five years) earnings growth rate of 12.4%. The Zacks Consensus Estimate for 2024 sales implies a 9.5% improvement over the previous year.
Triumph Group (TGI - Free Report) : On Mar 1, 2024, Triumph Group completed the sale of its Product Support business to AAR Corp. for $725 million. The divestiture will enable TGI to strengthen its balance sheet and focus on the OEM component, spares and IP-based aftermarket business.
TGI boasts a long-term earnings growth rate of 2.6%. Its share price has surged 31.2% in the past one year.
BAE Systems (BAESY - Free Report) : On Feb 16, 2024, BAESY completed the acquisition of Ball Corporation’s unit, Ball Aerospace, for $5.5 billion. Through this acquisition, BAE Systems will be able to expand into highly attractive markets like military and civil space, C4ISR and missiles and munitions.
BAESY boasts a long-term earnings growth rate of 12.9%. The Zacks Consensus Estimate for 2024 sales implies a 34.1% improvement over the previous year.
Price Performance
In the past year, shares of L3Harris have gained 4.9% against the industry’s 14.9% decline.
Image Source: Zacks Investment Research
Zacks Rank
L3Harris currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.