Elbit Systems, Israel’s largest private sector defense company, took a big step towards bulking up its U.S. operations over the weekend, announcing that it would be buying the night-vision technology business of Harris Corporation for $350 million.
Headquartered in Roanoke, Virginia, Harris Night Vision develops and manufacturers night-vision technology for American and allied military and security forces and for the federal homeland security market.
Harris is selling the business to meet U.S. antitrust requirements before it can complete a planned merger with another U.S. defense giant, L3 Technologies, which has its own night-vision business. Elbit’s acquisition of Harris Night Vision hinges on the merger being completed.
“The market position and technological strength of Harris Night Vision make this acquisition significant to our long-term growth strategy, with a particular focus on the U.S.,” Elbit CEO Bezhalel Machlis said.
Elbit shares closed up 1.9% at 489 shekels ($136.70) in Tel Aviv Stock Exchange trading Sunday.
The Harris deal comes as Elbit has focused on expanding sales into the U.S. market. Already by far the largest in the world, U.S. defense spending is expected to grow from $612 billion last year to $686 billion in 2019 and $710 billion in 2020. Elbit is also looking at acquisitions in other major arms markets, which are expected to grow as well amid heightened global tensions.
The Harris deal follows Elbit’s November 2018 acquisition of Israel’s state-owned arms maker IMI System for $495 million. That acquisition added active-defense systems for military vehicles to its portfolio of products. A month after the deal was completed, IMI won a $200 million contract from the Pentagon to supply the Israeli company’s Iron Fist protection system for the American military’s Bradley armored vehicles after years of testing by the U.S. military.
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A year ago, Elbit purchased Universal Avionics, an Arizona company, for $120 million. Although Universal Avionics specializes in avionics systems for business jets, turboprop aircraft, helicopters, regional and commercial airliners — mainly in the civilian sector, Elbit hopes to use its technology in military applications, too.
While Harris’ night-vision business is smaller than L3’s — which is why the two companies opted to divest it rather than L3’s — it is still a major supplier to the U.S. government of equipment and offers a very wide range of products. It also sells to 99 other countries, according to the Harris website.
Harris Night Vision is expected to post sales of between $150 million and $160 million this year, Harris CEO William M. Brown told an investors’ conference in January. Its operating profit margin is about 15%, almost double Elbit’s level. It employs roughly 350 people.
The acquisition opens a huge market for Elbit Systems in the United States and overseas, turning it into a major supplier in the United States and creating a new marketing channel for Elbit’s other products, sources said.
Elbit’s portfolio features night-vision equipment, including gear incorporated into the high-tech helmets that it makes for fighter aircraft and helicopter pilots. Its Elop unit sells night-vision equipment in the European and Asia-Pacific markets.
Elbit’s U.S. business is run under the aegis of its Elbit Systems of America unit, which will be buying Harris Night Vision. Elbit America has subsidiaries with facilities in Texas, New Hampshire, Alabama and Florida. It is also is a 50-50 joint venture partner with Rockwell Collins in the helmet business.