General Dynamics, GTE in Deal
General Dynamics Corp. agreed Tuesday to buy three telecommunications and information units from GTE Corp. for $1.05 billion, seeking to bolster its business of providing computer services and electronics to governments and the military.
The acquisitions would give the defense contractor businesses that will have sales this year of about $1.2 billion, about 70% of which come from the Defense Department. The units employ 6,200 and also have about $900 million in work under contract.
General Dynamics is acquiring faster-growing businesses than the tanks, destroyers and submarines for which it is best known. Last month, it agreed to buy business-jet maker Gulfstream Aerospace Corp. for $5.18 billion. The GTE acquisition more than doubles the sales of the company’s Information Systems and Technology group, formed in 1998 to take advantage of an expected spending surge on defense electronics and communications.
“It gets [the company] pointed in the direction of that portion of the defense budget that is growing the fastest--defense electronics,” said Loren Thompson, a defense analyst at the Lexington Institute, an Alexandria, Va.-based think tank.
The businesses being acquired include GTE’s Electronic Systems Division in Mountain View, Calif.; Communication Systems division in Taunton, Mass.; and Worldwide Telecommunication Services in Needham Heights, Mass.
General Dynamics Chairman Nicholas Chabraja didn’t say whether he will eliminate jobs from the GTE units. Falls Church, Va.-based General Dynamics formed the information and technology group last year after buying divisions of Lucent Technologies Inc., Ceridian Corp. and Computing Devices Canada Ltd.
GTE, the nation’s third-largest local-telephone company, ranks 15th on the Pentagon’s list of defense contractors. GTE is either the prime contractor or top subcontractor on six major Army communications or digital-switching systems, including the Maneuver Control System used to keep track of mobile units on the battlefield.
The acquisitions also will allow General Dynamics to bid on bigger government contracts--and more of them--in almost all U.S. states and abroad.
“We are now in position to actively go for programs we were unable” to pursue earlier, said Gordon England, who runs General Dynamics’ information systems and technology group.
The sale is expected to close in 60 days. The businesses will add 6 cents a share to earnings in 2000 and 8 cents in 2001, Chabraja said.
GTE is selling the government systems units as part of a strategy to shed non-core assets and raise $3 billion for expansion into the Internet. The Irving, Texas-based company is being acquired by Bell Atlantic Corp. for $80.9 billion to form the largest U.S. phone company.
GTE is still looking to sell a fourth unit of its Government Systems group. The business provides voice and data services to nonmilitary federal agencies and some commercial markets, and employs about 800 people.
General Dynamics’ shares rose 13 cents to close at $66.75 and GTE slipped 44 cents to close at $70.63. Both trade on the New York Stock Exchange.
