L-3 Communications will not take over Raytheon's Boeing Business Jet (BBJ) completion and Airborne Stand Off Radar (ASTOR) programmes when it acquires the company's Airborne Integration Systems (AIS) unit later this year. L-3 says it did not want the loss-making BBJ business or the "tremendous" liabilities attached to Raytheon's $2 billion fixed-price contract to develop and produce the ASTOR airborne ground surveillance system for the UK Ministry of Defence.
L-3's chief executive Frank Lanza says it will be a subcontractor to Raytheon on the ASTOR programme. AIS, based in Greenville, Texas, will continue to integrate Raytheon's radar and mission system on to the platform, a Bombardier Global Express business jet. The companies will work together on future ASTOR-like programmes and decide case-by-case which one will be prime contractor.
L-3 will pay $1.1 billion for AIS, which had sales of $900 million last year. Unit revenues are set to increase to $1 billion this year and grow 10% annually "for several years", says Lanza. AIS specialises in modifying and upgrading military aircraft, with 60% of its business in intelligence, reconnaissance and surveillance platforms and 40% in special operations forces aircraft and classified programmes.
AIS is the acquisitive company's largest deal yet, and will be financed by a $1 billion debt and equity offering. The company beat BAE Systems and Northrop Grumman to acquire the Raytheon unit, having previously lost to Northrop Grumman in the contest for Litton Industries and to BAE in the acquisition of Lockheed Martin's Sanders defence electronics business. L-3 expects to report revenues of $2.3 billion for 2001 and projects 20% growth this year before the AIS acquisition.
Relieved of the BBJ programme, which was losing $60-70 million a year, AIS is set to report an operating profit of $100 million this year.
Source: Flight International
