Ratheon, Hughes move closer to merger $9.5 billion deal gets antitrust approval

Defense

October 03, 1997|By BLOOMBERG NEWS

WASHINGTON -- Raytheon Co. and General Motors Corp.'s && Hughes Electronics won federal antitrust approval yesterday for their $9.5 billion combination, bringing the companies a step closer to creating the nation's third largest defense and aerospace company.

In a settlement with the Justice Department and the Pentagon, Raytheon and Hughes agreed to sell two defense electronics businesses with combined sales of about $50 million, erect a firewall that preserves competition for an upcoming bid on a new missile for the U.S. Army and provide fixed prices for AMRAAM missiles as the sole supplier of those weapons.

Federal regulators didn't seek missile divestitures, even though many antitrust and industry experts expected they would because the two companies are the nation's leaders in the industry.

The divestitures are the largest required since the defense industry began consolidating in the late 1980s. Raytheon will sell a Dallas-based maker of infrared sensors, which use heat detection to find their targets even in complete darkness and bad weather conditions. Lexington, Mass.-based Raytheon acquired that business in last year's $2.95 billion purchase of Texas Instruments Inc.'s defense electronic operations.

It also agreed to sell a Hughes unit that makes electro-optical systems that help guide missiles and provide night-vision surveillance. Operations for this unit are based in El Segundo, Calif., and La Grange, Ga. Raytheon has six months to sell the businesses; until then, they will remain separate from the combined company.

Raytheon, Hughes and Texas Instruments all competed in the market for ground electro-optical systems, and now would be part of the same company.

"Despite the department's conditions, we are very pleased with the outcome," said Hughes Chief Executive C. Michael Armstrong.

A combined Raytheon-Hughes will have more than $21 billion in revenue. Only Lockheed Martin Corp. and Boeing Co. will be larger in the defense and aerospace industry. Shareholders for Raytheon and Hughes still need to approve the transaction, as does GM's board, which is to meet Monday. The transaction is expected to be completed in December.

Shares of Raytheon closed 56.25 cents higher at $60.125. General Motors Hughes shares added 87.5 cents to $61.6875.

The settlement and a draft complaint will be filed simultaneously for approval by a federal district judge. Federal regulators said this won't be done until the companies negotiate a firm pricing agreement with the U.S. Air Force for Advanced Medium Range Air-to-Air Missiles early next year.

Pub Date: 10/03/97

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.