Harris to buy Tyco Electronics wireless unit

ATLANTA (Reuters) - Communications equipment maker Harris Corp HRS.N said on Thursday it agreed to buy Tyco Electronics Ltd's TEL.N wireless systems business for $675 million in cash, expanding its presence in the $9 billion market for land mobile radio systems.

The Tyco business, which provides wireless communications systems for law enforcement, fire and rescue, and public service organizations, had $461 million in sales in 2008.

Harris said the Tyco wireless systems business was complementary with its Harris RF Communications unit, which provides secure voice and data communications networks to military and government customers.

Harris said the acquisition would be a “significant contributor” to earnings in fiscal 2011 and beyond but cautioned that U.S. growth in land mobile radio systems could slow over the next year or two as state and local governments face pressure from the weak economy.

“We believe once we get through the budget crunch, however, there’s a large amount of pent-up demand for new systems and system expansion,” Harris Chairman and Chief Executive Howard Lance said during a conference call.

“We see this over the longer term, three to five year time frame, as an opportunity to grow certainly at high-single-digit kind of rates,” he added.

Harris told Reuters last month that it was actively looking for takeover candidates.

Also on Thursday, the company said it completed the purchase of privately held Crucial Security Inc, which provides services that help law enforcement and government agencies protect their networks.

In Spring 2008, Harris was seen as a takeover target itself amid media reports that it was seeking a buyer, but the company later said it was not for sale.

The acquisition of the Tyco wireless unit, which could be subject to working capital adjustments, is expected to close this summer. Morgan Stanley and Jones Day advised Harris, while Barclays Capital and law firm Davis Polk advised Tyco Electronics.

Tyco Electronics forecast an operating loss for the quarter ended March 27 of $3.6 billion to $4.1 billion, including a goodwill impairment charge of more than $3.3 billion due to significant sales and earnings declines. Excluding items, it expects operating earnings of $75 million in the quarter.

Tyco Electronics also said sales for the quarter were $2.46 billion, roughly in line with analyst estimates.

Reporting by Karen Jacobs; Additional reporting by Michael Erman in New York; Editing by Gary Hill