August 2, 2018 / 12:37 PM / 10 months ago

Defense supplier L3 combines aerospace, sensor businesses

(Reuters) - Defense equipment maker L3 Technologies Inc (LLL.N) said on Thursday it would merge its aerospace and sensor systems businesses to focus more on intelligence, surveillance and reconnaissance products.

The businesses make special mission aircraft, fleet management support services, networked warfighter systems, night vision equipment and space avionics.

The move comes at a time when defense spending in the United States is increasing. The U.S. Senate passed a $716 billion defense policy bill on Wednesday, backing U.S. President Donald Trump’s call for a bigger, stronger military.

L3’s new business, which is estimated to generate $4.7 billion in 2018 sales and will be called Intelligence, Surveillance & Reconnaissance (ISR) Systems, will be headed by Jeffrey Miller, senior vice president and president of the sensor systems unit. Mark Schwarz, president of its aerospace systems business, will retire after the transition.

“This business realignment action supports our objective to improve operating margin to 12 percent for 2019,” Chief Executive Officer Christopher Kubasik said.

The provider of communication and electronic systems to the U.S. military had said last year it would sell its aerospace and defense logistics support services unit Vertex and focus on ISR and communications systems businesses, which it believes will be more profitable in the future.

L3 is also looking to grow through acquisitions, and Kubasik said in May the firm could buy a company as large as $3 billion using a mix of cash and debt.

Since going public over two decades ago, the company has made over 130 acquisitions in building a business that now gets 70 percent of its revenue from the Pentagon and the remaining 30 from commercial and international customers.

Reporting by Arunima Banerjee in Bengaluru and Mike Stone in Washington; Editing by Saumyadeb Chakrabarty

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