SAN DIEGO -- General Dynamics Corp., which has been shedding non-core operations, agreed Monday to sell its electronics division to The Carlyle Group investment bankers for less than $100 million.
Carlyle said the deal for the division, which produces electronics used on weapons and has annual revenues of $300 million, should be closed by Nov. 30. The division has 2,300 employees, most at them at six facilities in San Diego, along with plants in Columbus, Ohio, and Omaha, Neb.
'We believe the General Dynamics' electronics division is an extremely well-managed organization that is well-positioned in the defense market with high-growth potential in the commercial sector,' said William E. Conway Jr., managing director of the Carlyle Group.
The price of the deal was not disclosed, but Conway said that it was for less than $100 million.
If the acquisition goes through, it will be the second major deal that Carlyle, a Washington, D.C.-based investor group led by former Defense Secretary Frank Carlucci, has made in recent months.
Carlyle was part of a successful $475 million bid led by Loral Corp. to buy the defense business of LTV Corp., with Loral acquiring the missile division and Carlyle and Northrop Corp. the aircraft unit. That deal closed Aug. 31.
Conway said in an interview that Carlyle would consider making other defense-related acquisitions at the right price. He also said that the electronics business only has a few 'synergies' with the LTV aircraft business, which has been renamed Vought Aircraft Co.
Carlyle has also made investments in airline caterer Caterair International; defense consultantsBDM International; book distributor Baker & Taylor; and commercial real estate services firm CB Commercial. Conway said Carlyle's businesses produce annual revenues of about $4 billion.
Carlyle said it will re-name the General Dynamics division 'GDE Systems' and its current chief, Dr. Terry Straeter, would serve as chief executive officer. It also said the deal does not include the electronics division's secure communications unit, which employs 150 to 200 workers.
Carlyle said the principal parts of the electronics division are its automatic test systems unit, the nation's largest supplier of test systems for the U.S. Air Force; and the tactical systems unit, which specializes in products used in digital mapping, charting, targeting, mission planning and signal processing for the military.
The sale is not a surprise. General Dynamics, of Falls Church, Va., has been particularly aggressive over the past two years about cutting back operations or selling off assets that do not meet its goal of operating defense businesses with a No. 1 or No. 2 market share.
Since last October, it has sold off a variety of 'non-core' assets, including its missile business to Hughes Aircraft for $450 million; its Cessna commercial aircraft operation to Textron for $600 million; and its data systems division to Computer Sciences Corp. for $200 million.
William Anders, chairman and CEO since January 1991, has said that the company's core businesses are military aircraft, submarines, land systems and space systems. Analysts have previously said Anders would probably may sell a few more non-core assets, such as the electronics division.
Other General Dynamics assets expected to be on block are the unit that builds fuselages for the McDonnell Douglas Corp. MD-11 trijet and the material services business. Additionally, it has been widely speculated that General Dynamics may merge its land systems business, which builds the M1 Abrams tank, with FMC's tank business, which builds the Bradley Fighting Vehicle.
Hughes Aircraft announced last month severe cuts at the former General Dynamics missile plant in San Diego as part of plans to cut more than 4,000 jobs over the next two years. Hughes said it would close the plants in Rancho Cucamonga, Calif., and Camden, Ark., and end production lines at plants in San Diego and Pomona, Calif.
It plans to transfer about 2,000 jobs from those plants to its factory in Tucson, Ariz., because of lower costs and unused capacity at that facility.
