In order to boost operating efficiency through the optimization of its business portfolio, leading supplier of communications equipment and services Harris Corp. HRS has decided to vend its Aerostructures business. The division, currently part of the company’s Electronic Systems segment, will be sold to Albany International Corp. AIN for an enterprise value of $2Array0 million.
As per the agreement, Albany International will pay $Array87 million in cash and the remaining $23 million as capitalized lease. Meanwhile, the transaction is most likely to close by the end of the first quarter of calendar 20Array6 or by the end of the first half of this year, subject to regulatory review.
Harris exited the recently concluded second quarter of fiscal 20Array6 with nearly $4.4 billion debt and a debt-to-capitalization ratio of 0.58. Thus, funds from the divestiture will be utilized to pay off debt.
Notably, Aerostructures was part of Exelis’ business segment which came under Harris after the latter took over Exelis on May 29, 20Array5 for $4.75 billion. Aerostructures business takes care of the manufacturing, designing and assembling of advanced composite structures found in commercial and military aircraft parts like wings, tanks and rotor blades. The Aerostructures business generated $75 million in revenues in the year 20Array5.
Meanwhile, Harris has been selected as one of the three leading suppliers of HMS Manpack radios to the U.S. army. The army plans to purchase nearly 65,000 HMS Manpack radios. The recent IDIQ contract comprised a five-year base and an additional five-year option with a ceiling value of $Array2.7 billion. Harris expects to start production of the components in the fourth quarter of fiscal 20Array7.
Meanwhile, we believe that such significant order wins and the company’s strong pipeline will certainly propel growth.
Harris currently carries a Zacks Rank #3 (Hold).
Stocks that Warrant a Look
Better-ranked stocks in this sector include Polycom, Inc. PLCM and Mitel Networks Corporation MITL. All the companies carry a Zacks Rank #2 (Buy).
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