Harris, L3 merger creates 6th largest U.S. defense contractor

The deal, forming a new company with a combined market value of over $33 billion, was announced on Sunday.

With little overlap between products, the new L3 Harris Technologies is set to capitalize on an increase in Pentagon spending, after five years of cuts, as well as an increase of commercial aircraft sales. Harris specializes in communications systems and electronics for military and civilian use, including air traffic control and global positioning systems.

L3 products include systems used in pilot training and safety, and aviation security, the Wall Street Journal reported on Monday.

The merger is in line with aerospace and defense contractors' recent policy of bringing more production in-house instead of outsourcing it. The practice provides better control of supply chains and offers revenue from repair work. Both companies currently devote over four percent of their annual sales to research and development, more than double that of most of their competitors.

The new company will be in the top 10 of global defense companies worldwide, with 48,000 employees and customers in 100 countries, L3 said in a statement.

L3 had been acquiring smaller companies with an eye toward increasing its profile and becoming a sixth major U.S. defense contractor, a list that already includes Lockheed Martin, Boeing, Raytheon, Northrop Grumman and General Dynamics.

The terms of the all-stock deal call for L3 shareholders to obtain 1.3 Harris shares, equal to $201.33 per share. Harris stock closed at $195.78 on Friday on the New York Stock Exchange.

The merger follows several others in the industry. TransDigm Group agreed to buy jet component manufacturer Esterline Technologies last week for $4 billion and tank- and aircraft-builder General Dynamics bought information-technology company CSRA in April for $7 billion.