United States’ based Harris and L3 Technologies specializing in military communications and electronics, announced their merger on Sunday creating one of the biggest global defence firms.
The merged entity—to be called L3 Harris Technologies Incorporated—will be the sixth-largest US defense company and one of the 10 largest in the world, with 48,000 employees and clients in 100 countries.
The merger will be achieved through a share swap wherein L3 shareholders will receive 1.30 Harris shares for each L3 share, according to a joint statement.
When the merger is approved by both companies' boards, Harris shareholders will control a 54 percent share of the combined company, while L3's will hold the remaining 46 percent. US government approval is still required for the merger.
Among its major contracts, Harris was recently selected to provide the electronic "brain" for the US military’s F-35 jet, as well as for more than 1,500 portable communication systems for the army.
The company had annual revenue of $6.2 billion for the fiscal year that ended in June. It has more than 17,000 employees and has offices in approximately 100 countries, according to its website.
L3, also an important Pentagon supplier, has 31,000 employees. It reported annual revenue in 2017 of $9.6 billion.
In calendar year 2018, the new company expects net revenue of $16 billion, with pre-tax profits of $2.4 billion and available cash flow of $1.9 billion, according to the statement.
The deal is expected to result in synergies generating $500 million in savings, with savings by the third year of $300 million due to the consolidation of headquarters, elimination of redundancies, and other measures.
L3 Harris Technologies plans to invest $450 million in cash over that period as it integrates the two companies.
The merger is expected to be completed by mid-2019. The resulting company will be based in Melbourne, Florida, Harris's home.
Each company will contribute six members to the new 12-person board of directors.
For the first two years, Harris's CEO, William M. Brown, will become chairman and CEO of the new company, while L3's CEO, Christopher Kubasik, will be vice president and chief operating officer. Afterward, Kubasik will become chairman and CEO while Brown becomes executive chairman.