L-3 Communications Holdings Inc., a
maker of bomb detectors and defense electronics, bought a
Raytheon Co. unit that makes commercial camera systems for about
$42 million to expand sales to law-enforcement and industrial
customers.
The Dallas-based business sells thermal-imaging products for
use in the public safety, fire, security and transportation
markets, L-3 said in a statement. The cash purchase will add
about $50 million to 2005 sales, New York-based L-3 said in a
statement Wednesday.
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Chief Executive Officer Frank Lanza, 72, has made more than
70 acquisitions since 1998 to build L-3’s capabilities in defense
electronics, surveillance, training and explosives detection. L-3
will replace WellPoint Health Networks Inc. in the Standard &
Poor’s 500 Index after Anthem Inc., Indianapolis, completes its
planned $16.4 billion purchase of the Thousand Oaks, Calif.-based health insurer, S&P said Wednesday after exchanges closed.
“It’s an opportunistic purchase to acquire some unique
technology,” said Peter Arment of JSA Research in Newport, R.I. “L-3 will be more focused on existing markets, whether
it be homeland security, law enforcement or defense.” He rates
the shares “buy” and doesn’t own any.
L-3’s sales last year climbed 26 percent to $5.06 billion
and are likely to rise this year to $6.78 billion, based on the
average estimate of 11 analysts surveyed by Thomson Financial.
Raytheon, the world’s largest missile maker, had 2003 sales
of $18.1 billion. The company, which said it will keep developing
thermal-imaging systems for military customers, has been selling
commercial businesses to focus on defense.
“It was a commercial business that didn’t align with our
customer base,” Raytheon spokesman James Fetig said in a
telephone interview about the unit, which has 250 employees. “It
wasn’t strategic in the growth plans of the company.”
Customers of the thermal-imaging business being bought by L-3 include the U.S. Air Force, the Federal Bureau of Investigation
and the U.S. Border Patrol, as well as governments and industries
in Europe and Asia, L-3 said in its statement.
The business, which evolved from defense applications,
developed smaller, lighter and more affordable infrared cameras
for applications from firefighting to surveillance and search-and-rescue operations.
“This is basically for homeland security,” said Cai von
Rumohr, an analyst at SG Cowen & Co in Boston. “This is a
product business, and they have much more of a product focus than
Raytheon does.” SG Cowen doesn’t rate shares of any companies.
The unit’s technology was also offered in the 2000 model of
General Motors Corp.’s Cadillac DeVille, the first use of such
technology to help make nighttime driving safer in passenger
cars. Few buyers chose the option because of its high cost, said
Arment.
This is the third business that L-3 has bought from Waltham, Mass.-based Raytheon in four years. Its biggest purchase
ever was Raytheon’s aircraft integration systems division in 2002
for $1.1 billion. Raytheon also has a facility in Portsmouth.
Bloomberg News
