Harris yesterday announced an agreement to purchase Tyco Electronics Wireless Systems — the company formerly known as M/A-COM and the second-largest player in the North America LMR market — for $675 million in cash.
Long known for its work in the defense communications sector, purchase of Tyco LMR unit — which is the only end-to-end provider of LMR systems in North America other than Motorola — will "clearly accelerate" Harris' push into the public-safety market, Harris President, Chairman and CEO Howard Lance said during a conference call after markets closed Monday afternoon.entered the public-safety market in earnest with the introduction of its Unity multiband portable radios, which are expected to be available commercially later this year. The
Harris believes the transaction will accretive to the company's earnings within the first year, despite the economic downturn that's creating tight budgets for many potential customers, Lance said. Over a five-year term, Harris believes the business will grow annually at rates exceeding 5%, he said.
"We believe we may go through a year or two where we see the market slow down, as a result of funding availability in state and local government," Lance said, noting "modest" projections for earnings accretion in fiscal year 2010. "We believe, once we get through the budget crunch, there's a large amount of pent-up demand for new systems and system expansion."
After the deal closes — expected by the end of June — the Tyco LMR business will operate as a business unit under the Harris RF Communication division headquartered in Rochester, N.Y. A name for the unit has not been determined yet, said Kevin Kane, director of sales and business development for the Harris RF Communications division during an interview today with Urgent Communications. Chuck Dougherty will continue as president of the unit and will report to Dana Mehnert, president of Harris RF Communications.
There is almost no overlap between the Harris and Tyco businesses, so no significant regulatory issues are anticipated. In terms of Tyco LMR unit's headquarters in Lowell, Mass., "We don't anticipate any major changes of substance in any way," Kane said. "This is a very mature and established business."
Kane said Harris will strive to make the transaction seamless for existing Tyco Electronics Wireless Systems customers.
"Our focus will be to continue the high level of service that Tyco Electronics already provides its customers," he said.
This deal is expected to allow Harris to pursue LMR opportunities through its established business channels within the defense, federal and international markets. Given the mission-critical nature of defense and public-safety communications, Kane said he believes there will be a convergence of the technologies used in the sectors and that this transaction should position Harris well for such an evolution.
"[Public safety] is a market that requires assured communications," Kane said. "There is no room for error."
During the conference call yesterday, Harris CFO Gary McArthur described land mobile radio as an "adjacent market that we have studied for some time." Kane said discussions between Tyco and Harris started in the middle to latter part of 2008.
The only aspects of Tyco Electronics Wireless Systems excluded from the deal are the assets and liabilities associated with the state of New York contract for a statewide wireless network (SWN). The state of New York terminated the $2 billion contract in January, but Tyco has filed a lawsuit challenging that decision.