L-3 Communications Holdings Inc. LLL completed the proposed sale of its Marine Systems International (“L-3 MSI”) business to Wartsila Corporation for approximately $318 million (before selling and other transaction expenses).
The L-3 MSI divestiture is part of L-3 Communications’ portfolio reshaping strategy. Management believes that this transaction will be instrumental in boosting operating margin and driving growth by focusing more on its core operations.
MSI was previously a part of Electronic Systems, a segment focused on the commercial ship industry and engaged in the supply of electrical systems, integrated navigation, and power and propulsion systems for all types of ships.
Given the clear signs of bottoming in the U.S. defense industry, the company intends to reshape its portfolio further through innovative and affordable solutions. The MSI divesture is in line with this strategy and is expected to improve margins on a consolidated basis.
We remind investors that in Jan 2015, the company acquired MITEQ, Inc., a manufacturer of specialized RF microwave products and SATCOM components for space and military applications. The company intends to capitalize on growing demand in this industry on the back of the acquisition, which is expected to boost the company’s top line by roughly $60 million for the year ending Dec 31, 2015.
L-3 Communications continues to expand and strengthen its existing businesses through acquisitions and divestitures, in order to add novel technologies and products, gain access to select customers, programs and contracts, and ensure attractive returns on investment.
L-3 Communications Holdings currently has a Zacks Rank #3 (Hold). Investors interested in the aerospace sector may consider Spirit AeroSystems Holdings, Inc. SPR, Leidos Holdings, Inc. LDOS and Northrop Grumman Corporation NOC, each carrying a Zacks Rank #2 (Buy).
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