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General Dynamics to Buy Motorola Unit

Wireless: The company expects the $825-million deal to enhance earnings and bolster information technology operations.

August 07, 2001|ARINDAM NAG | REUTERS

General Dynamics Corp. said Monday that it agreed to acquire a division of wireless technology giant Motorola Inc. for $825 million in a move to strengthen its communications and information technology operations.

The deal, which is expected to close in 60 days, would enhance General Dynamics' earnings immediately, the Falls Church, Va.-based company said.

It is buying Motorola's integrated information systems group, which provides defense and other government customers with technologies, products and systems for secure communications and integrated communication systems. The group, based in Scottsdale, Ariz., has 3,000 employees.

The business would become part of General Dynamics' information systems and technology group.

General Dynamics Chairman and Chief Executive Nicholas Chabraja said at a news conference in New York that the company expects the acquisition to add $100 million in earnings before interest and taxes for 2002 on revenue of $830 million.

This will add to the $2.4 billion in revenue General Dynamics already records from its existing communications and IT business. General Dynamics, which is paying for the transaction through debt, also is assuming certain liabilities of the Motorola unit.

The company's stock fell 86 cents to close at $81.81 on the New York Stock Exchange, after hitting a session high of $83.50. Motorola shares fell 3 cents to close at $18.60, also on the NYSE.

Besides strengthening General Dynamics' position in communications and information technology for military and government customers, General Dynamics said, the deal would enhance company capabilities in command, control, communication, computers, intelligence, surveillance and reconnaissance.

From Motorola's point of view, this was a step in strengthening its balance sheet by getting out of an area that was never a core strength.

"This is a win for Motorola because it allows them to focus on its core businesses and it's a win for General Dynamics because it rounds out their portfolio," John Cole, vice president and general manager of Motorola's information security systems and products division, told Reuters.

With more than $10 billion in short- and long-term debt, Motorola has been under pressure to get out of nonstrategic areas.

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