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Raytheon may shed units
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October 1, 1997: 6:34 a.m. ET
Company ordered to sell missile operations to complete Hughes buy
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NEW YORK (CNNfn) - The Justice Department has reportedly ordered Raytheon Corp. to sell key components of its missile-technology unit before it will allow its $9.5 billion acquisition of Hughes Electronics Corp. to be finalized.
Justice officials told Raytheon this week that acquiring the Hughes operation from General Motors will lead to a near monopoly position in technology used to guide missiles and position satellites.
Raytheon would have to shed one or more of the units that manufactures the components. Although the operations are only responsible for about $100 million in annual sales, the technology often leads to billion-dollar contracts.
According to The Wall Street Journal, Justice will also likely want more safeguards placed between Raytheon's missile businesses to preserve competition in pending contracts. The department is also likely to recommend Raytheon sell the weapons for less money as compensation for the lost competition.
Raytheon is expected to agree to the terms so that the deal can be presented to GM's board of directors when it meets Saturday. Raytheon reportedly already has a draft consent from the Justice Department, although company officials would not confirm the report.
It is not known whether Raytheon will have to sell the technology before the deal can close or if a buyer has been lined up. The company will reportedly also divest some units acquired in its buyout of Texas Instruments' defense business as they overlap with units that will be part of the Hughes acquisition.
Once it adds Hughes, Raytheon will have an estimated $21 billion in annual revenue. That will put it in the No. 3 aerospace electronics position behind Boeing Co. and Lockheed Martin Corp. However, Raytheon will become the top company in the lucrative defense electronics industry.
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Raytheon
General Motors
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