Harris Corporation (NYSE:HRS) and L3 Technologies, Inc. (NYSE:LLL) have agreed to combine in an all-stock merger of equals to create a global defense technology leader, focused on developing differentiated and mission-critical solutions for customers around the world. The merger is expected to close in the mid-calendar year 2019, subject to satisfaction of customary closing conditions, including receipt of regulatory approvals and approval by the shareholders of each company.

On October 14 the companies announced they have agreed to a ‘transformational merger of equals’ in the largest merger in defense history. The combined company called ‘L3 Harris Technologies’ will be the 6th largest U.S. defense contractor, with approximately $16 Billion in annual revenues and 48,000 employees worldwide. The company would be ranked about 180 on the latest Fortune 500 list. For the calendar year 2018, the combined company is expected to generate net revenue of approximately $16 billion, EBIT of $2.4 billion and free cash flow of $1.9 billion. The combined company to be named “L3 Harris Technologies” and headquartered in Melbourne, Florida.

“This merger creates greater benefits and growth opportunities than either company could have achieved alone.” L3 Chairman, President, and Chief Executive Officer, Christopher E. Kubasik said. “The companies were on similar growth trajectories and this combination accelerates the journey to becoming a more agile, integrated and innovative non-traditional 6th Prime focused on investing in important, next-generation technologies. L3 Harris Technologies will possess a wealth of technologies and a talented and engaged workforce. By unleashing this potential, we will strengthen our core franchises, expand into new and adjacent markets and enhance our global presence.”

The merger is expected to create significant value with a broader portfolio of technology capabilities and increased scale to address evolving customer needs. It brings together complementary portfolios and a shared focus on R&D to accelerate innovation and speed to market while strengthening capabilities across multiple domains.

“This transaction extends our position as a premier global defense technology company that unlocks additional growth opportunities and generates value for our customers, employees, and shareholders. Integration planning is already underway, and from our extensive experience with integration, we are confident in our ability to realize $500 million of annual gross cost synergies and $3 billion of free cash flow by year 3.”

Under the terms of the merger agreement, which was unanimously approved by the boards of directors of both companies, L3 shareholders will receive a fixed exchange ratio of 1.30 shares of Harris common stock for each share of L3 common stock, consistent with the 60-trading day average exchange ratio of the two companies. Upon completion of the merger, Harris shareholders will own approximately 54 percent and L3 shareholders will own approximately 46 percent of the combined company on a fully diluted basis.

The combined company, L3 Harris Technologies, Inc., will be the 6th largest defense company in the U.S. and a top 10 defense company globally, with approximately 48,000 employees and customers in over 100 countries.