L3Harris Technologies is offloading its Commercial Aviation Solutions (CAS) division to private equity investors, in a deal potentially worth up to 800 million dollars. This sale is part of its broader strategy to reduce debt following the acquisition of Aerojet Rocketdyne.
The transaction, announced on November 27, also encompasses the potential sale of L3Harris’s surveillance joint venture, subject to the right of first refusal by the private equity investors, TJC. The deal is expected to be finalized in the first half of 2024, contingent on standard closing conditions and regulatory approvals.
The CAS unit, employing approximately 1,450 individuals, is known for its pilot training, flight data analytics, avionics, and advanced air mobility services. This divestiture aligns with L3Harris’s recent trend of shedding commercial-focused businesses to concentrate on its core defense sectors, under the leadership of Chairman and CEO Chris Kubasik.
Kubasik’s vision is to position L3Harris as a prime defense contractor for the Pentagon, especially following the $4.7 billion acquisition of Aerojet Rocketdyne. The move is designed to reduce L3Harris’s debt to less than three times its pretax earnings by the end of December, from 3.7x at the end of September.
Future Prospects and Investor Briefing
Financial analysts anticipate further divestitures as part of L3Harris’s debt repayment and portfolio optimization strategy. The company is also scheduled to brief investors on December 11-12 regarding its future forecasts and business plans.
The agreement with TJC includes a $700 million cash payment and a contingent earnout of up to $100 million, based on the CAS unit achieving certain performance targets in 2023 and 2024.
