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Raytheon-TI deal cleared
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July 2, 1997: 5:45 p.m. ET
But $2.9B purchase requires shedding of Texas Instruments radar operation
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WASHINGTON (CNNfn) - Federal anti-trust regulators Wednesday approved Raytheon Co.'s $2.9 billion purchase of Texas Instruments' defense electronics business on the condition it sells a unit that produces a key radar component.
The merger as originally proposed would have raised the government's costs for advanced radars used in weapons systems and virtually eliminated competition, said Joel Klein, acting assistant attorney general.
"Our action today demonstrates that we're not going to give carte blanche approval to mergers in the defense industry," said Klein, who heads the department's anti-trust division. "While industry downsizing can be desirable, or even necessary, we will do what it takes to preserve effective competition."
The settlement marks a major milestone for Raytheon, said Dennis Picard, the company's chief executive. "We are buying a dynamic, world-class business that competes successfully in key defense electronics markets," he said. The TI defense electronics business had sales of $1.8 billion in 1996.
Klein called the pact the largest divestiture in the defense industry since companies started consolidating after the Cold War.
Klein said the TI unit that Raytheon must sell had sales of $1.3 billion in 1996; a Raytheon spokesman disputed that amount and said sales totaled about $38 million.
The Justice Department contended that Raytheon and Texas Instruments are the only makers of "monolithic microwave integrated circuits" for Defense Department radar programs. MMICs extend the power and range of radar by allowing it to scan airspace more efficiently without detection.
Raytheon is also a leading producer of the radar systems that use MMICs.
"Without the settlement, Raytheon might have tried to disadvantage its radar competitors," Klein said. Raytheon could have refused to sell MMICs to competitors such as Northrop Grumman and Lockheed Martin.
Under the terms of the agreement, Raytheon must sell the Texas Instruments unit within 180 days.
Raytheon, based in Lexington, Mass., produces aircraft products, appliances and electronics. Sales totaled $13 billion in 1996.
Texas Instruments is headquartered in Dallas and produces semiconductors, defense electronics systems, software, computers, and electronics. 
-- Martine Costello
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Raytheon Co.
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