Oct 4 U.S. defense contractor Harris Corp
has launched the sale of parts of its Critical Networks
division, according to people familiar with the matter, its
first divestiture move after striking a deal with activist hedge
fund Jana Partners.
The asset sale, which could fetch more than $1 billion,
comes after Harris, a major supplier of U.S. Army radios, signed
an agreement with Jana in August to add two new independent
directors to its board. Harris promised at the time to continue
to assess its portfolio to identify non-core assets.
Harris' information technology services operation, which
sits within Critical Networks, is among the divisions up for
sale, the people said this week, citing marketing materials sent
to potential buyers. This and other parts of Critical Networks
could draw more than $500 million in the sale, the sources said.
The company's business that supplies communications services
to the energy industry, known as Harris CapRock Communications,
is also expected to be sold in a separate process, according to
the sources. CapRock could also attract offers of more than $500
million, the sources said.
Selling off sections of that division would help the company
lower its energy industry exposure, in addition to reducing its
The sources asked not to be identified because the sale
process is not yet public. Harris declined to comment.
Shares of Harris were flat at $91.38 on the New York Stock
Exchange on Tuesday.
The Melbourne, Florida-based company, with around $7.5
billion in annual revenue, is organized into four business
segments: communication systems, which sells military and
civilian radios; space and intelligence systems; electronic
systems; and critical networks.
"When we believe a business is not core to our strategy to
drive shareholder value, we undertake proactive steps, as
evidenced by the recent sale of Aerostructures and the sale of
our commercial healthcare and broadcast communications
businesses in prior years," Harris CEO Bill Brown told analysts
on the company's fourth-quarter earnings call on Aug. 2.
Harris said in its fiscal year-end report that revenue
pressure would likely increase next year. It pointed to
CapRock's energy industry exposure and weakness in its IT
segment as among the reasons behind the revenue pressure.
The company's fiscal 2016 net income dipped 3 percent to
$324 million, it said in August. The company's shares have risen
5.3 percent year-to-date, while the S&P 500 Index is up
5.9 percent. Harris has a market capitalization of $11.3
(Reporting by Mike Stone in Washington and Michael Flaherty in
New York; Editing by Will Dunham)