Modification is worth over a billion

Raytheon is to sell its aircraft modification and integration business to L-3 Communications for $1.13 billion in cash.

The companies expect to finalise the sale by the end of the first quarter of 2002, following US government approval.

Aircraft Integration Systems (AIS) provides aircraft modification, systems integration, and maintenance services to US as well as global customers. It has modified more than 15,000 aircraft of more than 125 types.

Under the agreement, Raytheon will retain the UK Ministry of Defence ASTOR (Airborne Standoff Radar) program, certain receivables and the Boeing Business Jet program, which is nearing completion. Annualised revenue of the business was approximately $900 million in 2001.

Raytheon expects a taxable gain on the sale but an accounting loss due to the amount of goodwill associated with Raytheon’s 1995 acquisition ofE-Systems. The transaction is expected to be only moderately dilutive to earnings in 2002.

The after-tax proceeds from the sale will be used for debt reduction and general corporate purposes.

Raytheon will continue as the lead integrator on the $1.3 billion ASTOR program, which the company was awarded in 1999. ASTOR is an advanced airborne radar surveillance system that provides day/night and all-weather imagery of the ground over a large area. The imagery can be analysed on board the aircraft and passed in real-time to ground stations and other military systems.

Raytheon will retain its strength in ISR, with capabilities in imagery, communications, electronics (radar and data links), mission planning andmanagement and signal and image processing.

With more than 6,000 employees, AIS has operations in Greenville and Waco, TX, Lexington, KY, and at customer sites world-wide. The sale also includes the related business operations in Avalon, Victoria, Australia.

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