L3Harris Technologies’ move to acquire Viasat’s Link 16 Tactical Data Links (TDL) product line for roughly $1.96 billion will bolster the former’s effort to remain a large, trusted disruptor for the U.S. military, while also providing cash for the latter, which is reshaping its portfolio ahead of its own major acquisition.
For L3Harris, the deal–announced Oct. 3–brings in the TDL product line, which provides U.S. and allied military customers with Link 16-enabled terminals, including the Multifunctional Information Distribution System (MIDS) platform. The terminals support an installed base of more than 20,000 aircraft, ships and ground platforms globally.
That fleet increasingly includes space assets such as the U.S. Space Development Agency’s Tranche 1 Tracking Layer satellite constellation, which aims to detect, identify and track advanced missile threats. L3Harris and Northrop Grumman together were awarded $1.3 billion in July to provide the constellation.
The increased connectivity falls under a generational effort by the military, currently referred to as the Joint All Domain Command and Control (JADC2), to better connect and exploit national security assets. L3Harris has sought to be a prominent prime contractor under the theme. It won a contract in July to provide the backbone of the U.S. Navy’s JADC2 architecture and integrated fires capability. In September, it announced it was one of five companies the Air Force selected to be a part of the Advanced Battle Management System Digital Infrastructure Consortium to design and develop the JADC2 digital backbone for the Air Force Department.
“L3Harris’s pending acquisition of Viasat’s Link 16 data link franchise is a strategic add-on that bolsters L3Harris’s existing data link/radio capabilities, albeit with de minimis accretion to L3Harris’s adjusted earnings per share,” Cowen analysts said.
Jefferies analysts noted that the Link 16 business could grow mid-single digit percentages in coming years, driven by an upgrade cycle for connection resiliency, as well as organic growth in space such as the Transport Layer, as well as weapons connectivity. Roughly one-third of the customer base is the U.S. Air Force and another third is to U.S. foreign military sales customers. “Competition tends to be broad with offerings from Raytheon Technologies and BAE Systems, in addition to the other primes,” they noted.
The deal is expected to close in the first half of 2023, subject to “customary” closing additions and regulatory approvals. Ostensibly it adds 450 employees based in Carlsbad, California, to L3Harris. Link 16 will be included in L3Harris’s Communication Systems division. At the start of this year, L3Harris reorganized into three main business divisions, with Aviation Systems and its top unit executive no longer part of the company’s structure.
Last November, Carlsbad-based Viasat announced it planned to acquire UK satellite operator Inmarsat for $7.3 billion. Inmarsat shareholders approved the deal over the summer, and in September UK regulators did the same. That deal is designed to expand Viasat’s broadband network—both globally in regard to customers and also across several orbits and spectrum bands—in an effort to remain competitive against SpaceX and other budding low-Earth-orbit constellation providers.
