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Friday, October 28, 2016

Harris Corp. to Acquire Global Connectivity Services

November 9, 2010

Harris Corporation, (NYSE:HRS) an international communications and information technology company, has entered into a definitive agreement to acquire the Global Connectivity Services (GCS) business from Schlumberger Information Solutions, an operating unit of Schlumberger Limited (NYSE:SLB).  The acquisition is planned to extend Harris’ capabilities as a global provider of mission-critical, end-to-end managed satellite communications services for customers operating in remote and harsh environments – including the energy, government and maritime industries.  Schlumberger GCS will be combined with recently acquired CapRock Communications to form Harris CapRock Communications.

With customers in more than 50 countries, Schlumberger GCS provides global communication services for a range of customers primarily in the oil and gas industries, including Schlumberger.  With principal operations in the United Kingdom, Norway, Singapore and the U.S., Schlumberger GCS has 400 employees in more than 25 countries, as well as 12 globally deployed teleports, a 24x7 Network Operations Center (NOC), worldwide terrestrial infrastructure, and Very Small Aperture Terminal (VSAT) manufacturing capabilities in the U.K. and Singapore.

The agreement to acquire Schlumberger GCS follows the Harris acquisition of CapRock Communications on July 30, 2010.
Under the terms of the agreement, Harris will purchase the Schlumberger GCS business for $397.5m in cash, subject to post-closing adjustments.  The goodwill arising on completion of the acquisition will be an allowable tax expense with an estimated net present value of $50m, resulting in an effective purchase price of $347.5m.  For the calendar year ending December 31, 2010, Schlumberger GCS revenue is expected to be $170m, and earnings before interest, taxes, depreciation and amortization (EBITDA) is expected to be $41m.  Excluding acquisition-related charges, the acquisition is expected to have minimal impact on Harris non-GAAP earnings in fiscal 2011; be slightly accretive in fiscal 2012; and a significant contributor to earnings and growth in fiscal 2013 and beyond.  The transaction is subject to customary regulatory reviews and closing conditions, and it is expected to close during the third quarter of fiscal 2011.  Harris will finance the acquisition using a combination of cash on hand, commercial paper, borrowings under its committed credit facilities, and long-term debt.

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