FALLS OFF Inc.
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agreed to purchase L3Harris Technologies Inc.’s
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military training department for $ 1.05 billion, the companies said Monday, in a move that would expand the Canadian aerospace company’s defense operations.
The unit has three main activities: Link, which provides military training in the US; Doss Aviation, which provides flight training for the United States Air Force; and AMI, which designs and manufactures simulator hardware. The company, which has approximately $ 500 million in annual sales, is expected to be based in Tampa, Florida, after the deal closes, the company said.
The Wall Street Journal reported on Sunday that such a deal was imminent.
CAE of Saint-Laurent, Quebec, expects the deal to contribute to earnings per share and forecasts cost savings of approximately $ 35 million to $ 45 million per year in the second year after closing. It will be funded by a private placement of approximately C $ 700 million, equivalent to approximately $ 549.4 million.
CAE has a market value of approximately C $ 9.5 billion. It has traditionally specialized in flight simulators and training equipment and has broadened its reach through several deals over the past few months, although none come close to the deal being discussed for the L3Harris unit.
The Canadian company is the market leader in pilot training for commercial jet aircraft and makes flight simulators for the Boeing Co.
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737 MAX and other jets severely affected by the Covid-19-caused pandemic in global air travel.
CAE, which also manufactures health equipment such as fans, has sought to expand and improve the margins of its defense operations by hiring two senior executives from L3Harris.
L3Harris was created by the 2019 merger of Harris Corp. and L3 Technologies. Servicing a C-130H at an L3Harris plant in Waco, Texas.
Photo:
Business Wire / Associated Press
L3Harris, based in Melbourne, Florida, with a market value of $ 38 billion, was formed by the 2019 merger of Harris Corp. and L3 Technologies Inc. It was the largest defense industry merger ever at the time, with a transaction value of more than $ 15 billion. It was overshadowed by the 2020 Raytheon Co. and United Technologies Corp.
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to Raytheon Technologies Corp.
The outlook for the defense industry has improved during the pandemic, a turnaround after years when the growth of commercial spaceflight looked more promising. Companies whose revenues depend largely on commercial expenses, including Boeing and its suppliers, have suffered severe cuts to business and leisure travelers.
The sale of the military training company would take L3Harris most of the way to achieve its goal of divesting itself from assets representing a whopping 10% of sales and using all proceeds to buy back its own stock. It sold its airport security unit for $ 1 billion to Leidos Holdings Inc.
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last year, as well as some smaller companies.
L3Harris also has a division that trains jet pilots and builds flight simulators for the 737 MAX and other jet fighters.
Goldman Sachs & Co. LLC acted as exclusive financial advisor to CAE and advised RBC Capital Markets on the private placements. CAE’s legal counsel were DLA Piper and Norton Rose Fulbright. Morgan Stanley & Co. LLC was the financial advisor to L3Harris and Sullivan & Cromwell LLP was the legal advisor.
—Doug Cameron contributed to this article.
Write to Cara Lombardo at [email protected]
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Appeared in the March 1, 2021 print edition as ‘Simulator Maker Pursues Training Unit’.