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Leidos Buys L3Harris Security and Automation Business for $1 Billion

Reston, VA-based Leidos Holdings has announced a definitive agreement to buy the airport security and automation businesses from UK-based L3Harris for $1 billion in cash.

The acquisition follows the merger of L3 and Harris last year. "The agreement provides a stable path forward for the Security & Detection Systems and MacDonald Humfrey Automation businesses, while enabling L3Harris to focus its resources on core technologies," said William Brown, chairman and CEO at L3Harris. L3Harris is now an aerospace and technology company, and the divestiture of its aviation security and automation concerns allows focus on that core. 

Funds from the sale are expected to be used to repurchase shares and offset dilution. 

The two L3Harris businesses are already successful, with annual revenues of around $500 million. Together, they have 1,200 employees, with more than 20,000 systems deployed across more than 100 countries. They serve customers in the aviation, transportation, government and critical infrastructure markets.

"The acquisition of these businesses will help accelerate our growth and innovation and enable us to offer the market a comprehensive security platform," said Roger Krone, chairman and CEO of Leidos. "The businesses further our commitment to a diversified revenue stream, by expanding our customer penetration into 75 additional countries. This transaction is projected to be immediately accretive to revenue growth, EBITDA margins, and non-GAAP EPS upon closing."

The transaction will be funded from cash on hand and incremental debt, and is expected to close by the end of Q2, 2020 -- subject to customary closing conditions and regulatory approval.

"This powerful portfolio of technology and the outstanding team of employees that support it complement the Leidos team well. The work this team performs is vital to securing so many important locations -- where passengers count on equipment reliability and efficiency to keep them safe," continued Krone. "Together, we will advance our strategy of helping secure some of the world's most critical infrastructure and the individuals who travel through it."

Leidos sees three primary benefits from the purchase: an expanded product portfolio, diversified revenue stream through an increased international presence, and greater scale through the addition of a new global airport sales channel across the full Leidos portfolio of product and service solutions. "The addition of this technology to the Leidos portfolio," said a Leidos company statement, "will enhance the company's offerings in a global security product market projected to grow in excess of the federal budget."

The purchase comes at a time of rising awareness of the need for security in the aviation business. At Davos, Switzerland the World Economic Forum published a paper in January 2020 discussing the need to secure the aviation industry in the age of convergence

The acquisition also comes less than two years after Leidos sold its own Leidos Cyber assets -- formed earlier through the merger of Lockheed Martin's corporate division, Industrial Defender, and Leidos' own commercial cybersecurity business -- to Capgemini for an undisclosed amount.

Related: Broadcom Completes Acquisition of Symantec Enterprise Unit for $10.7B

Related: Accenture to Acquire Symantec's Security Services Unit from Broadcom 

Related: UN Aviation Agency Concealed Serious Hack: Media 

Related: F-Secure Looks to Address Cyber Security Risks in Aviation Industry

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Kevin Townsend is a Senior Contributor at SecurityWeek. He has been writing about high tech issues since before the birth of Microsoft. For the last 15 years he has specialized in information security; and has had many thousands of articles published in dozens of different magazines – from The Times and the Financial Times to current and long-gone computer magazines.