A major Arlington employer is changing hands.
On March 1, Montreal-based CAE Inc. announced that it has entered into a definitive agreement with L3Harris Technologies (NYSE: LHX) to acquire L3Harris’ Military Training business for $1.05 billion, subject to customary adjustments.
The L3Harris Military Training business includes Link Simulation & Training, Doss Aviation and AMI. L3Harris Link is one of the leading providers of military training solutions in the United States; Doss Aviation is the provider of initial flight training to the United States Air Force (USAF); and AMI is a design and manufacturing facility for simulator hardware. Upon closing, the L3Harris Military Training business would operate under CAE USA, headquartered in Tampa, Florida. L3Harris Military Training was headquartered in Arlington and employed 1,600 in 23 locations in 9 countries. The deal is expected to close by the end of the year.
The acquisition will expand CAE’s position as a platform-agnostic training systems integrator by diversifying CAE’s training and simulation leadership in the air domain, complementing land and naval training solutions, and enhancing CAE’s training and simulation capabilities in space and cyber. L3Harris Military Training will bring significant experience in the development and delivery of training systems for fighter and bomber aircraft, Army rotary-wing platforms, submarines and remotely piloted aircraft. L3Harris Military Training will also bring a significant backlog and position on key programs, including the USAF Simulators Common Architecture Requirements and Standards (SCARS) program, USAF F-16 Simulators Training Program (STP), US Navy/Marine Corps F/A-18 aircrew training systems, USAF Ground Based Strategic Deterrent (GBSD) training and USAF B-2 training system.
“The proposed acquisition represents a significant value creation opportunity for all CAE stakeholders. It accelerates our growth strategy in Defense and Security and is highly complementary to our core military training business, broadening our position in the United States,” said Marc Parent, CAE’s President and Chief Executive Officer. “We are adding new customers, experience on new platforms and building our depth of expertise to address all domains – air, land, sea, space and cyber – as well as expanding into adjacent markets such as mission and operations support. This proposed transaction will provide greater balance to CAE across businesses and geographies, and like our recent acquisitions in the civil aviation market, it demonstrates our focus on bolstering and expanding our position in the markets we serve. We are making investments with a view to emerge from the pandemic stronger and prepared to meet the growing demands of our customers.”
L3Harris’ Military Training business had annual revenues of approximately $500 million in 2020, according to CAE.
L3Harris Military Training is CAE’s fourth announced acquisition in the past four months. Other recent acquisitions include FSC, an Amsterdam-based provider of total civil training solutions; TRU Simulation and Training, a manufacturer of flight simulators and training devices for civil markets; and Merlot.aero, a civil aviation crew management and optimization software company.
The acquisition and other related transaction costs are to be funded through the issuance of $550 million aggregate amount of subscription receipts to two institutional investors on a private placement basis as well as other currently available liquidities. The Private Placements are supported by a $375 million investment by Caisse de dépôt et placement du Québec, a Canada-based global institutional investor, and a $175 million investment by GIC Private Limited.
Goldman Sachs & Co. LLC is acting as exclusive financial advisor on the acquisition and providing assistance on the Private Placements. Legal advice is being provided to CAE by DLA Piper and Norton Rose Fulbright. RBC Capital Markets is acting as advisor for the Company on the Private Placements.
Morgan Stanley & Co. LLC is acting as financial advisor and Sullivan & Cromwell LLP is serving as legal counsel on the Military Training transaction for L3Harris. Moelis & Company LLC is serving as financial advisor and Simpson Thacher & Bartlett LLP as legal counsel for the Combat Propulsion Systems and related businesses transaction.
In a second transaction, RENK AG announced it will acquire L3Harris’ Combat Propulsion Systems and related businesses for about $400 million in cash. With annual revenue of approximately $230 million, the Combat Propulsion Systems business manufactures military engines and transmissions.