DRS Technologies Buys Raytheon Divestitures

Robert C. Pini

DRS Technologies Inc. recently announced an agreement to purchase portions of Raytheon's ground electro-optical systems and focal plane array businesses, which formerly were parts of Hughes Aircraft and Texas Instruments, respectively.
DRS expects the $45 million acquisition to bring significant value to the company; first because of a $180 million backlog in orders that the Raytheon businesses bring with them, and second because it will help DRS to broaden the scope of its capabilities and to take a better position in the market.

Base for military jobs
"We'd like to get our foot in the door," explained Patricia M. Williamson, a spokeswoman for DRS. "There are certain branches of the [US] Army that we have not had as customers which we will now be working with. We hope to interest the Army in some of our other products as well."
DRS designs and manufactures defense electronics, data storage and sighting systems. "We already do a lot of business with all branches of the military. These groups will provide us with a much stronger base for our Army customer," Williamson said.
Combined annual revenues from the two Raytheon businesses are estimated at $625 million, based mostly on sales in military programs, which include the US Army's Horizontal Technology Integration Second-Generation Forward-Looking Infrared System, the Long-Range Advanced Scout Surveillance System, the Improved Bradley Acquisition System and the Javelin missile programs.
DRS has no plans to move the businesses from El Segundo, Calif. (electro-optical systems), and Dallas (focal plane array). Williamson indicated that it is unlikely that operations will be affected.
"Those businesses are profitable, the people who work there are knowledgeable and skilled, and we don't expect any reason for layoffs. They do have research capabilities that we will use to create new products." The two businesses employ about 280 people.
Before completion of the acquisition, auditors were to define which parts of the businesses would remain with Raytheon and which parts would go to DRS, including settling any claims regarding intellectual property. The US Departments of Justice and Defense were expected to approve the sale by the end of September.
The deal stems from a decision in 1997 by the Department of Justice ordering Raytheon to divest its electro-optical systems businesses following its acquisition of the defense businesses of Hughes and Texas Instruments.
DRS had been looking at the purchase for several months prior to closing. According to Williamson, several other firms were interested in the acquisition, which in the end fell to DRS because of its base in electro-optical systems, a promising growth strategy and a solid history. DRS made two other purchases in the last year: the Applied Systems Div. of Spar Aerospace Ltd. of Carleton Place, Ontario, Canada, and Hadland Photonics Ltd. of Tring, UK.