Harris To Buy Exelis In Cash-stock Deal Worth $23.75/shr - Quick Facts

(RTTNews) - Communications equipment maker Harris Corp. (HRS) has agreed to acquire Exelis Inc. (XLS) in a cash and stock deal valued at $23.75 per share, or about $4.75 billion enterprise value.

Pursuant to the transaction, Exelis shareholders would receive $16.625 in cash and 0.1025 of a share of Harris common stock, based on Harris' closing price as of February 5, 2015, for each share of Exelis common stock. Upon completion, Harris shareholders would own nearly 85 percent of the combined company, and Exelis shareholders would own about 15 percent.

David Melcher, chief executive & president of Exelis, said: "Our 2014 was another strong year, and we expect to report revenue of approximately $3.25 billion and adjusted operating margin between 12.4 and 12.5 percent, which is in line with our previous guidance."

Exelis indicated that around $25 million of its anticipated free cash flow for 2014 shifted into 2015 due to some delayed collections, but that its estimate for 2015 free cash flow is being increased to nearly $275 million. Also, it expects depreciation and amortization of some $106 million in 2014, net debt of $139 million and a net unfunded pension liability of about $1.9 billion at the end of 2014.

Based on an anticipated June 2015 closing, the transaction is expected to be slightly accretive to Harris in the first full year and a significant contributor afterwards. Harris has identified estimated net pre-tax cost synergies from the combination in a range of $100 million - $120 million, with savings expected to achieve annual run-rate in year three. The transaction may close in June 2015, subject to customary closing conditions, including regulatory and Exelis shareholder approval.