July 03, 1997|By BLOOMBERG NEWS
WASHINGTON -- Raytheon Co. got U.S. approval for its $2.95 billion purchase of Texas Instruments Inc.'s defense electronics business by agreeing to sell a TI unit that produces a key component for radar systems.
Under a settlement announced yesterday by the Justice Department, Raytheon will sell Texas Instruments' production facilities for high-power monolithic microwave integrated circuits, or MMICs, which extend the power and range of radar systems for fighter aircraft and other weapons systems.
Although the chips produced less than $40 million in revenue in ** 1996 -- a fraction of the combined company's electronics business -- they were the sticking point in negotiations. Government officials said the technology will underlie $10 billion in weapons systems bought in the next two to three years.
Justice Department officials charged that the acquisition as it was originally planned would have raised prices for those systems.
"We looked at a number of narrower alternative remedies but neither we nor the Department of Defense would accept a Band-Aid solution to fix this serious competitive problem," said Joel Klein, head of the Justice Department's antitrust division.
A Raytheon spokesman said the divestiture was only a minor concession, and he hailed the agreement as a step toward the company's expansion goals in a rapidly consolidating defense industry.
"This is a banner day for Raytheon," said Robert McWade. "We received approval to buy one of the most prestigious defense electronic firms in the world."
Justice Department and Defense Department officials now will turn their attention to an even more contentious merger -- Raytheon's planned $9.5 billion acquisition of General Motors Corp.'s Hughes Electronics business. Officials largely put consideration of that transaction on hold while they worked out the Texas Instruments settlement.
In the Hughes combination, federal officials are expected to look closely at whether the new company would have too much control over the market for air-to-air missiles and high-tech sensors known as electro-optics. Analysts expect that transaction to close by the end of the year.
Shares of Raytheon, based in Lexington, Mass., fell 43.75 cents to close at $52. Shares of Dallas-based Texas Instruments rose $1.625 to $88.
Right now, Texas Instruments and Raytheon are among the leading manufacturer of MMICs, advanced chips made with gallium arsenide. Northrop Grumman's electronics division in Linthicum uses the chips in radars.
Although other companies make similar products, Justice Department officials said those are the two only firms able to produce the high-quality chips needed by the U.S. military.
Pub Date: 7/03/97
