WASHINGTON (Reuters) - U.S. defense communications and information technology company Harris Corp HRS.N, breaking its silence after weeks of speculation, said on Monday the company is not for sale and is not pursuing a merger, sending its stock down more than 15 percent.
“Harris is not pursuing any transaction. We’re not for sale,” Chairman, President and Chief Executive Howard Lance told Reuters in a telephone interview.
He said Harris did not initiate a process to sell itself, despite media reports and market speculation that it was looking for a buyer.
Lance said he and the board of directors had great confidence in the future of Harris, which has doubled its size and seen its share price quadruple in the past five years.
He said introduction of new products, expanded international sales and strategic acquisitions would continue to fuel growth.
“We think we have a lot going for us going forward,” he said, noting that international sales, commercial activities and non-defense governmental work would help offset any decline in sales resulting from an expected slowdown in the growth of defense spending.
“The whole area of communications and IT is going to continue to be a very good place to be,” he said. “I just don’t think we’re serving a market that overnight is going to dry up and go away.”
Harris has government and commercial customers in more than 150 countries, generating annual revenues of over $5 billion, and more than 16,000 employees.
Lance said Harris normally does not comment on rumors or speculation, but decided to issue a statement on Monday because the “level of rhetoric had risen to a point that it was becoming a distraction and could be damaging to the company, and could fuel speculation in our stock.”
Harris shares closed 6.17 percent higher at $65.78 on Friday after a report in the Wall Street Journal, which said preliminary bids from potential buyers were in the low $70 per share range, or about $10 billion. That was less than the $75 to $80 per share range the company’s board hopes to fetch, the newspaper said, citing people familiar with the matter.
Harris shares fell $10.28 to $55.50 in early trade on the New York Stock Exchange.
Speculation about a possible sale began on May 9, when the Journal quoted unnamed sources as saying Harris was exploring strategic options which could lead to its eventual sale.
One industry analyst last week told Reuters that General Dynamics Corp (GD.N) recently made an informal overture to Harris, but dropped it amid its own management succession.
Northrop Grumman Corp (NOC.N) also looked into a possible bid for Harris but balked at the high valuation, he added.
Analysts said big defense firms named as possible buyers had shown only tepid interest given the company’s current high valuation, narrow product focus and heavy commercial exposure.
Lance declined comment on any discussions with specific possible buyers, but acknowledged that from time to time the company was approached by other companies interested in various transactions, including a potential sale.
He said the company’s board and management took its responsibility to its shareholders seriously, and carefully considered any such offers.
“When we get approached, we listen. Having said all of that, the company is just not pursuing anything at this time. We did not initiate any kind of process,” Lance said.
He said the company’s diverse businesses, including a new push into cyber security and information assurance, would help insulate Harris against cyclical downturns in any one sector.
Even if U.S. defense spending declined, there would still be hundreds of billions of dollars spent in the markets in which Harris competed, Lance said.
Asked whether Harris was considering any acquisitions of its own, Lance said takeovers had played a key role in the company’s growth and would remain part of the company’s strategy in the future.
Reporting by Andrea Shalal-Esa; Editing by Kim Coghill and Dave Zimmerman