Home / M&A Activity / Harris to Sell Govt IT Services Business to Veritas Capital for $690M

Harris to Sell Govt IT Services Business to Veritas Capital for $690M

Harris Corp. (NYSE: HRS) has agreed to sell its government information technology services business to private equity investment firm Veritas Capital for approximately $690 million in the military radio maker’s second major divestiture over less than one month as part of its larger portfolio reshaping effort.

The deal comes approximately three weeks after Harris completed the $425 million sale of its CapRock maritime communications business to SpeedCast International to help pay down debt and contribute cash to shareholder return.

Harris purchased fellow defense technology manufacturer Exelis in May 2015 for $4.75 billion.

Melbourne, Fla.-based Harris announced in August an agreement with Barry Rosenstein’s activist hedge fund Jana Partners on two mutual appointments to the board of directors after the group became one of Harris’ 10 largest shareholders.

Jana is the same fund that took a 6-percent stake in Computer Sciences Corp. (NYSE: CSC) in February 2015 and CSC subsequently spun off its U.S. public sector business approximately nine months later to form the federal IT services contractor now known as CSRA (NYSE: CSRA).

Harris expects the sale of its government IT services business to complete by the end of its current fiscal year in July and decrease FY 2018 earnings by $0.10-$0.15 earnings per share.

The Herndon, Va.-based unit expects to record $1.07 billion in FY 2017 revenue and carries out IT and engineering-managed services for federal agencies in the defense, intelligence and civilian arenas.

Harris will retain its air traffic management business and operate under three segments post-close: electronic systems, communication systems, and space and intelligence systems.

Houlihan Lokey advised Harris on the sale of the IT services business.

Veritas Capital purchased government services contractor Alion Science and Technology in 2015 for what Dow Jones reported at the time as nearly $300 million.

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