Hughes Sale Likely to Get Federal OK

The government is expected this week to approve another mega-merger in the defense industry--Raytheon Co.’s $9.5-billion purchase of General Motor Corp.’s Hughes Aircraft Co.--but only if Raytheon sells several prized electronics divisions that could have given it a near monopoly in key missile technologies, according to industry and government sources.

Lawyers for the Justice Department’s antitrust division and the two companies have been in around-the-clock negotiations on final details of an agreement since the weekend. Sources familiar with the talks said an announcement could come as early as today.

Since it was announced in January, the proposed merger has drawn opposition from top Pentagon officials, members of Congress and other defense contractors, who were concerned that the new Raytheon would have a monopoly in the market for air-to-air missiles. They also worried that Raytheon could leverage its advantage in radars and sensors to raise prices for military hardware and gain an unfair advantage over rivals.

After an eight-month review, Pentagon officials concluded that while the merger would eliminate competition between Raytheon and Los Angeles-based Hughes for some existing missile contracts, savings from combining two production lines and engineering staffs would outweigh the benefit of continued competition.

Sources said Raytheon will be required to sell a Texas unit developing “focal plane arrays” that are the eyes and brain of many missile systems.

It would also be required to divest a Hughes operation in California developing high-tech sensors that allow missiles to “see” their way through smoke, haze and darkness.

Sources said Raytheon only reluctantly agreed to accept the conditions.