) has reached a deal to sell its Broadcast Communications
business to an investment firm The Gores Group, LLC for $225
million. Offloading the broadcast arm is part of the company's
strategy to concentrate on its core business.
Sale proceeds include $160 million in cash, $15 million in
subordinated promissory note and an earn-out of $50 million based
on future performances. The transaction is expected to close in
the early part of 2013 and is subject to customary regulatory
Harris' Broadcast Communications division manufactures and
supplies infrastructure and networking equipments to the
broadcasters, which include next generation routers, processors,
multiviewers, video servers among others. It has manufacturing
facility at Toronto, Quicny, Ohio, Denver and employs around 1700
Earlier in May, Harris declared plans to divest Broadcast
Communications following which it retrenched twelve employees in
November due to the company's poor quarterly performance. The
divestiture is believed to be a positive move by Harris as the
Los Angeles-based investment firm has lots of investment and
Harris is a leader in the public safety and professional
communications market and its radio products are very popular
among the defense sectors of different countries. The company has
been receiving numerous orders for its Falcon III tactical radio
from various military and Government organizations. During the
first quarter of fiscal 2013, Harris' Tactical Radio
Communications segment received new orders worth $254 million and
has an order backlog of nearly $612 million.
We believe divesting its broadcast arm will allow the company
to focus more on its major revenue contributor RF Communication
segment and compete more efficiently with companies like
General Dynamics Corp.
), which also provide high-end public safety communications
We are maintaining our long-term 'Neutral' recommendation on
Harris Corporation. Currently, it holds a Zacks #3 Rank, implying
a short-term Hold rating.
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