Daily Management Review

US Harris Corporation and L3 Technologies to create a defense contractor giant


High-tech defense companies Harris Corporation and L3 Technologies announced a $ 33.5 billion merger. The new company will be the seventh largest defense contractor in the world, beating companies such as Airbus, and approaching such giants as Boeing, General Dynamics and Northrop Grumman.

The “merger of equals” between Harris Corporation and L3 Technologies was announced late Sunday evening. The market capitalization of the combined company, which will be called L3 Harris Technologies, will reach $ 33.5 billion, annual revenues - about $ 16 billion, revenues from defense technologies and products - $ 11.9 billion. Harris Corporation specializes in communications technology for the military and space - tracking systems, night vision, electronic suppression, interception of radio signals, airborne geodetic observation, etc. The company L3 Technologies develops systems for combat control, avionics, flight simulators, scanning and recognition, detection explosives, high-tech sights.

Prior to the merger, L3 Technologies and Harris Corporation ranked 12th and 19th in terms of annual revenue from defense activities in the rating of the 100 largest defense companies in the world according to Defense News.

The deal will allow them to enter the top 10 largest defense companies in the world, taking seventh place and beating the French Airbus.

The combined L3 Harris Technologies will be close to such giants of the global defense industry as General Dynamics (annual revenues from defense technologies and products are $ 19.5 billion), Boeing ($ 20.5 billion) and Northrop Grumman ($ 21.7 billion). 

American experts believe that the desire of the American defense industry to unite has been spurred by a sharp increase in the military budget under Donald Trump. In mid-August, the American president signed the military budget for 2019. It amounted to $ 716 billion, which is $ 33 billion more than the Pentagon had originally requested. The Defense Ministry explained the need for increased funding by threats from Russia, China and North Korea. However, by August 1, when the document passed the US Senate, the budget grew to $ 716 billion, states Bloomberg Intelligence. This will be a key point in securing more profitable general contracts and moving to the status of main contractors, whereas earlier the company more often became a subcontractor.

source: bloomberg.com