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L3Harris divestitures set up new CEO with cash cushion

WASHINGTON, March 10 (Reuters) - L3Harris Technologies Inc plans to return billions in cash from recent divestitures to shareholders while allowing a new chief executive to invest in research and development as the U.S. defense contractor aims for more Pentagon space sensor contracts, company officials said on Wednesday.

The company is the market leader in tactical radios for the U.S. military and sees more international business on the horizon, current CEO Bill Brown said in a joint interview with President and Chief Operating Officer Chris Kubasik, who takes over the reigns on July 1.

Following the 2019 merger of L3 Technologies and Harris Corporation, L3Harris sold several units, such as its pilot training business for $1 billion, in an attempt to align itself with future U.S. defense spending priorities like cybersecurity and sensors.

“With our free cash flow generation and nearly $2 billion in additional divestiture proceeds, we expect, between 2021 and 2022, returning over $7.5 billion to shareholders,” Kubasik told investors the company’s first post-merger presentation to investors on Wednesday.

It expects to keep research and development funding at 4% of revenues, Kubasik said in the interview following the call adding, “we’re not short changing the business.”

Kubasik, a former Lockheed Martin executive, told Reuters that he has done more than 25 acquisitions in his career.

The company expects U.S. growth from prospects in its space, tactical radio, mission avionics, maritime and classified businesses.

Last year, the Space Development Agency awarded separate contracts to L3Harris and SpaceX to build the first tranche of a new missile tracking satellites used for missile defense. (Reporting by Mike Stone in Washington, D.C. Editing by Marguerita Choy)

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