Harris Corp has announced plans to sell its broadcast communications unit to private equity firm Gores Group in a deal worth US$225m.
Gores will pay US$160m of this consideration in cash when it expects to close the deal in early 2013. Some US$15m will…
Harris Corp has announced plans to sell its broadcast communications unit to private equity firm Gores Group in a deal worth US$225m.
Gores will pay US$160m of this consideration in cash when it expects to close the deal in early 2013. Some US$15m will be paid in subordinated promissory notes and a further US$50m is tied to an earnout period based on future performance.
Florida-based Harris announced plans to divest the underperforming asset on 1 May to focus on its core communications and information technology business.
The company plans to use the proceeds to repurchase up to US$200m of its shares next year.
William Brown, Harris’ CEO, explained: “This is in addition to the US$200m of share repurchases already planned for fiscal 2013 and reflects our ongoing commitment to effectively deploy capital, including returning cash to shareholders.”
In a Q3 results call earlier this year, Brown said the company decided to divest the unit after a review of its business portfolio highlighted a lack of effective integration over the last decade, and a market outlook that was not as promising as it had first appeared.
The review also flagged its cyber integrated solutions operations as ripe for divestment. A spokesman said today that the company was still looking to sell the cyber hosting facility based in Virginia.
Both assets are part of Harris’ integrated network solutions division, which also holds its satellite communications provider CapRock. Declining revenue in the group’s IT services and broadcast communications businesses helped offset strong growth from CapRock during Q3 2012. As a result of a non-cash charge related to broadcast communications, the segment also posted an operating loss of US$406m.
Gores managing director Ryan Wald said the PE firm was looking forward to investing in the group to realise its potential.
“We are excited to provide the capital and support to transition this division to a strong and independent company further enabling it to continue developing and delivering market leading technologies to its customers,” said Wald.
Harris, which operates in more than 150 countries, established its integrated network solutions division in March 2011, when it consolidated newly acquired assets that had been a part of its government unit.
It hired Morgan Stanley for advice on the broadcast communications sale.