L3 Technologies (NYSE: LLL) and Harris (NYSE: HRS) have agreed to merge in an all-stock deal that will establish the country’s sixth largest defense technology company serving government and industry clients across more than 100 countries.
The combined company will operate as L3 Harris Technologies in Melbourne, Fla., upon the deal’s completion that is expected in mid-calendar year 2019, the firms said in a joint statement published Sunday.
“This merger creates greater benefits and growth opportunities than either company could have achieved alone,” said Christopher Kubasik, L3 chairman, president and CEO.
Kubasik added the combined entity will leverage its portfolio of tech offerings and talented workforce to build up core franchises, broaden global footprint and expand into adjacent and new markets.
William Brown, Harris chairman, president and CEO, said the transaction offers more growth opportunities and value for employees, clients and shareholders.
“Integration planning is already underway, and from our extensive experience with integration, we are confident in our ability to realize $500M of annual gross cost synergies and $3B of free cash flow by year 3,” added Brown.
Brown will serve as chairman and CEO of L3 Harris Technologies, while Kubasik will assume the roles of vice chairman, chief operating officer and president.
Kubasik will transition to CEO and chairman roles for the third year, while Brown will serve as executive chairman.
Both companies aim to jointly expand end-to-end capabilities across ground, maritime, air, cyber and space domains; build up spectrum and radio frequency technologies; and expand presence in national security and other key strategic domains.
The deal, cleared by the firms’ boards of directors, is still subject to approvals by shareholders and regulators as well as other customary closing conditions.
Harris will own approximately 54 percent of the combined firm, while L3 stockholders will keep the remaining equity stake upon the merger’s completion.
The combination is projected to generate $16B in net revenue, $1.9B in free cash flow and $2.4B in earnings before interest and taxes for CY 2018.
L3 stockholders will get 1.30 common shares of Harris’ stock for each share of common stock they own.
Morgan Stanley & Co. and Sullivan & Cromwell LLP respectively serve as financial adviser and principal legal counsel to Harris, while Paul, Weiss, Rifkind, Wharton & Garrison LLP act as special counsel to Harris’ board of directors.
Goldman Sachs advises L3 on the deal’s financial aspects, while Simpson Thacher & Bartlett LLP serves as the firm’s legal counsel.