The Justice Department announced Wednesday that Raytheon Co. may acquire the defence system and electronics unit of Texas Instruments Inc. if it sells off a small but key component.
That business unit which produces high-tech chips used in radar systems amounts to only about 2 percent of annual sales in the Texas Instruments unit. Raytheon readily agreed to the condition for closing the $2.95 billion deal.
Its a great day for Raytheon, said company spokesman Robert McWade. Were pleased and delighted that Justice has approved this transaction.
The Justice Department said the divestiture which must be completed within six months is the largest required since the post-Cold War-era effort began to consolidate the defence industry. Our action today demonstrates that were not going to give carte blanche approval to mergers in the defence industry, Joel Klein, acting assistant attorney general for antitrust, said in a statement. The proposed settlement requires approval by a U.S. District Court judge after a 60-day period for public comment.
Such approval is routine. Raytheon and Texas Instruments have competed to develop high-tech chips which contain high-power amplifier monolithic microwave integrated ciruits (MMICs) used by commercial companies and sought by the military as a component in new radar systems.
Raytheon is one of several manufacturers using the MMICs pronounced mimics) chips to produce radars with extended power and range. The government said if Raytheon were the only maker of MMICs chips, it could dictate terms to competitors in the government radar market Northrop Grumman Corp., Lockheed Martin Corp. and Hughes aircraft or refuse to sell to them at all.
And that could result in higher prices to the government, and ultimately taxpayers, the government said.
Analysts said they expected the deal to go through but were somewhat surprised that the Justice Department ordered an outright divestiture rather than requiring Raytheon to license the technology to competitors. Everyone expected approval. I didnt think divestiture would be the answer. I thought they would license it out, said Jack Modzelewski, an analyst with Paine Webber.
Meanwhile, Raytheon continues negotiations with the Justice Department on its proposed $9.5 billion takeover of Hughes Electronics Corp.s defence business.
A spokesman said the company hopes to wrap up the deal by the fall. The Justice Department said in a statement that its investigation of the Hughes deal was continuing.
Raytheon stock rose 12.5 cents to $52.44 and Texas Instruments climbed 87.5 cents to $87.25 in consolidated trading on the New York Stock Exchange.
