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Hughes Electronics to Buy Magnavox Electronic Systems for $370 Million


Hughes Electronics Corp., reaffirming its commitment to the defense industry, said Monday that it agreed to buy Magnavox Electronic Systems Co. from The Carlyle Group for $370 million in cash.

Magnavox Electronic, based in Ft. Wayne, Ind., is a producer of military communications gear and other defense electronics. The company, which employs 350 people at a plant in Torrance, is no longer related to the Magnavox line of televisions and consumer goods sold by Dutch giant Philips Electronics.

In the post-Cold War era, Los Angeles-based Hughes has been one of the more successful defense-industry contractors in shifting its emphasis toward commercial products such as satellites. But the General Motors Corp. subsidiary also has said it will continue building its strongest defense operations through acquisitions.

The Magnavox Electronic purchase from Carlyle, a Washington-based partnership that focuses on defense properties, is part of Hughes' "invest or divest" strategy of either enhancing its defense lines or getting rid of them, Hughes Vice Chairman Michael T. Smith said in a telephone interview.

The two companies are "very complementary to one another," he said. Among other things, Magnavox Electronic has communications gear on many types of U.S. fighter jets and bombers--equipment that Hughes will have the opportunity to upgrade with its own electronics expertise, Smith said.

Smith also indicated that a bigger merger might be in Hughes' future if such a purchase would "make sense for our shareholders." (Hughes has stock that trades separately from GM's shares.) He said the Magnavox acquisition does not mean that Hughes is "intentionally looking at medium-sized" deals only.

"We've looked at almost everything that has become available" in a wave of defense mergers in recent years, Smith said. "If the right one comes along, of any size, we're willing to take a look at it."

Defense electronics accounted for $5.6 billion, or nearly 40%, of Hughes' $14.1 billion in total revenue last year. Hughes makes military radar and communications systems, along with missiles such as the Tomahawk, which NATO forces fired at Serbian targets in Bosnia on Sunday.

Magnavox Electronic has about 3,000 employees overall and reported 1994 revenue of more than $400 million.

On another matter, Smith said there are no plans for GM to spin off Hughes into a separate company. Speculation about such a move resurfaced last month when the auto maker announced plans to spin off its computer-services unit, Electronic Data Systems.

"For the time being, we're comfortable with the relationship with General Motors," Smith said. "They don't have any intention of doing anything with us, and that's fine with us. We like to think we're [already] on our own."

Also, Hughes-Avicom International, a Pomona-based Hughes division that develops airline entertainment gear, said it formed an alliance with computer-software giant Microsoft Corp. to design a new generation of in-flight entertainment systems. The systems could include news and information services, interactive programming, home shopping and travel arrangements, the company said.

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