Harris Corp. [HRS] on Friday said it has agreed to sell its $1 billion government information technology services business to the private equity firm Veritas Capital for $690 million in cash, a deal the company said allows it to focus on its core businesses.
The company’s air traffic management business is not part of the sale and will now operate within the Electronic Systems segment.
The acquisition is subject to regulatory approval and is expected to close in the second quarter of 2017.
Harris said the proceeds from the sale will support its cash deployment strategy, including pension pre-funding and share repurchases.
Harris also said the pending sale of the government IT business, combined with the recent sale of its CapRock satellite communications unit, will result in dilution of 10 to 15 cents per share in its fiscal year 2018.
The government IT business has 4,000 employees and is expected to have nearly $1.1 billion in sales in the current fiscal year. The business supports NASA’s Space Communications Network and Deep Space Network programs, and provides IT and engineering managed services to the Defense Department and other government agencies.
“Today’s announced divestiture, coupled with the recent sale of CapRock, reflects our strategy of optimizing the business portfolio to create shareholder value,” William Brown, chairman, president and CEO of Harris, said in a statement. “These divestitures sharpen Harris’ focus on growing core franchises where technology is a key differentiator, providing compelling value to our customers.”
Harris’ remaining operating segments are Electronic Systems, which now includes the FAA programs,electronic warfare and avionics, Communication Systems, which includes tactical radio and public safety communications businesses, and Space and Intelligence Systems, which consists of weather, geospatial, antenna/reflector and other space-related businesses.
Macquarie Capital is serving as Veritas’ financial advisor on the deal.