L3Harris Reaching Its Portfolio Reshaping Goals

 

L3Harris Technologies weathered the COVID-19 crisis quite well, with sales rising 3 percent to $18.2 billion.  The growth trajectory continued in the first part of 2021, and the company expects revenue in the $18.5 to $18.9 billion range for the year, excluding the effects of pending divestitures.

L3Harris is continuing to tighten its operations as it seeks to further refine its portfolio following its 2019 merger. While L3Harris Technologies is a formidable player in the defense electronics sector, the merger did create a little overlap – most notably in the night vision sector.  To avoid anti-trust issues, Harris sold its night vision operations to Elbit Systems in a deal valued at $350 million.

As it began the process of combining the two firms, the company decided to focus on what it sees as core markets, specifically in the C4ISR sector.   L3Harris management has said it could sell up to 10 percent of the company that is not considered core, and several major deals have pushed the company close to this goal.

The first operation to be divested was the airport security and automation business, which was sold to Leidos for $1.0 billion in 2020. This business provides airport and critical infrastructure screening products, automated tray return systems, and other industrial automation products.  This was followed by the sale of optics and sighting manufacturer EOTech for $60 million.

In 2021, L3Harris consented to exit military training with the agreement to sell its military training operations to Canada’s CAE for $1.05 billion.  The L3Harris Military Training business includes Link Simulation & Training, Doss Aviation, and AMI. L3Harris Link is a provider of military training solutions in the United States, Doss Aviation is the provider of initial flight training to the United States Air Force (USAF), and AMI is a design and manufacturing facility for simulator hardware.  L3Harris has so far retained its commercial pilot training and simulator operations.

At the same time, the company also signed an agreement to sell its Combat Propulsion Systems and Magnet-Motor GmbH businesses for about $400 million in cash to Germany’s RENK. Combat Propulsion Systems, based in the U.S., supplies transmissions and engines, such as the AVDS-1790 series, for armored vehicles in the U.S. and international markets. Magnet-Motor develops and designs high-performance electric power supplies and hybrid drive systems for military applications and is located in Starnberg, Germany.

These sales have helped reshape L3Harris’s portfolio and push it close to the company’s target of reducing assets that account for about 10 percent of sales.  Proceeds from the divestitures are expected to be used for share repurchases.

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About Richard Pettibone

A military history enthusiast, Richard began at Forecast International as editor of the World Weapons Weekly newsletter, eventually moving to the company's premier newsletter service, World Aerospace & Defense Intelligence (WADI). Richard is the current editor of the Defense & Aerospace Companies, Volume I (North America) and Volume II (International) services. The two books provide detailed analyses of major aerospace and defense contractors. As a contributor to Aviation Week & Space Technology's 2005 and 2006 Aerospace Source Book, he authored the Prime Contractor & Major Manufacturer profiles. Find out more at www.forecastinternational.com

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