February 5, 2020 | International, C4ISR
By: Jill Aitoro
WASHINGTON — L3Harris Technologies could divest up to 10 percent of the company, according to CEO Bill Brown, as its recent decision to sell its airport security business for $1 billion is seen as the first of more transactions expected to refine the firm's portfolio.
L3Harris signed a definitive agreement to sell the business unit to Leidos, according to an announcement Tuesday. The transaction is expected to close in mid-2020, barring any issues tied to regulatory approvals. Proceeds from the divestiture are expected to be used to repurchase shares and offset dilution.
The deal is part of a larger strategy to reshape the portfolio, focusing on what Brown described on a call with analysts as “high-margin, high-growth, technology-differentiated businesses where we can win and generate attractive returns.”
“Although this is the first and largest transaction we're contemplating, our portfolio-shaping process is ongoing and may ultimately result in 8-10 percent of total company revenue being divested over time,” he said.
The company's 2019 revenue of $18.1 billion could translate to as much as $1.8 billion in divestitures.
Brown told Defense News in June 2019 — one month before the merger of Harris and L3 Technologies was completed — about plans to divest a “pretty significant” piece of the business in the first six months as a single company.
“Anytime you put two companies with two portfolios together and you rethink what strategy you want to accomplish, there's going to be some pieces of the portfolio at the back end of the bus,” Brown said at the time. “We have to look at where we want to put our management time, capital, and [research and development] investment. We can't put it on pieces that might not be as strategic."
Brown told analysts that the deal would not impact the company's $3 billion free cash flow target in 2022. That in theory would set up L3Harris for a sizable acquisition down the road, should the company choose to go in that direction.
A company spokesman could not comment on the specific defense-nondefense split post divestiture, but L3Harris would presumably see a larger slice of the business focusing on defense opportunities.
In the 2019 Defense News Top 100 list of the largest defense companies, Harris and L3 reported 72 percent and 81 percent of revenue as defense-focused, respectively.
L3Harris reported $18.1 billion in fiscal 2019 revenue. Once the deal with Leidos closes, the airport security businesses' $500 million in annual revenue would transition off the books. That said, L3Harris is forecasting 5-7 percent revenue growth in 2020 — so it won't be a straight reduction.
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By: Tom Kington ROME — Italy shipbuilder Fincantieri has reopened its facilities after more than a month of closure due to coronavirus. The state controlled firm shut down on March 16 after talks with unions as the virus swept through Italy — the first Western country to be hit hard. Since then, Italy's death toll has been overtaken by the U.S., but remains the most exposed country in Europe, with more than 25,000 deaths and 187,000 total infections. As the contagion rate slows however, the government is targeting May 4 as the date to relax rigid lockdown rules for the public. Fincantieri was given the go ahead to restart production on Monday — at a reduced pace. At the firm's Riva Trigoso yard in the Liguria region, where 1,800 were employed before lockdown building Italy's final FREMM frigate and PPA vessels for the Italian navy, just 350 will initially return to work, a spokesman said. Of that number, 150 will be Fincantieri staff, while the remainder are maintenance, cleaning and security contractors. A similar policy is being followed at Fincantieri's Muggiano yard, also in Liguria, where 2,600 are normally employed, and where just 200 staff and 200 contractors have returned to continue work for Italy on a logistics vessel, the Vulcano and a new LHD, the Trieste; as well as a corvette for Qatar. “We hope to be back to full personnel numbers by the end of May or the start of June,” said the spokesman. In the meantime, safety precautions will be taken, including staggered entrances to the yards for staff, obligatory masks and gloves at work, temperature checks at entrances to spot fever sufferers and in-house medical staff. Each staff member will be given a packet of 20 masks per week so they can change them multiple times during each day. “We are planning buses to get staff to work so they don't have to use public transport,” said the spokesman. Similar measures will be taken at Fincantieri's other yards in Italy, which build cruise ships. During the shutdown, the firm's 8,900 staff were kept at home through use of vacation time, furloughs and home working. By contrast, Italian state defense group Leonardo did not close during the lockdown, although many staff worked from home when possible. A deal was struck with unions to introduce social distancing and cleaning at facilities in Italy, and no staff were furloughed, a spokeswoman said. Separately, the Italian government has reconfirmed Leonardo CEO Alessandro Profumo in his role after his mandate ended. The government did however appoint a new chairman, Luciano Carta, who moves from his post as director of Italy's foreign intelligence service. He replaces Gianni De Gennaro, who was head of the government department overseeing Italy's foreign and domestic intelligence services between he joined Leonardo in 2013. https://www.defensenews.com/coronavirus/2020/04/22/fincantieri-reopens-shipyards-in-italy