Harris Corporation Higher On Exelis Merger Deal
Harris Corporation (NYSE: HRS) traded higher after it agreed to acquire a smaller defense contracting competitor for $4.4 billion.
Harris said it will pay $23.75 a share in cash and stock to acquire Exelis Inc (NYSE: XLS).
Harris recently gained 7.4 percent, trading at $74.62; Exelis was changing hands at $23.88, up 35 percent.
Harris chief executive William M. Brown called the deal "transformational" and said it will boost earnings "slightly" in its first full year, and "significantly" thereafter.
Exelis expects to post 2014 revenue of $3.25 billion, while Harris has annual revenue of about $5 billion.
Bridge financing of $3.4 billion from Morgan Stanley Senior Funding Inc. will initially help pay for the merger.
Permanent financing in the form of term loans and unsecured bonds is expected prior to a June closing.
Strong free cash flow from the combined business will help Harris to "pay down debt rapidly."
Annual savings of $100 million to $120 billion will stem from consolidating headquarters and eliminating Exelis' public company costs, as well as from operational and functional efficiencies, Harris said.
Shareholders of Exelis will receive $16.625 in cash and 0.1025 of a share of Harris common stock for each Exelis share.
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