As expected, Raytheon Co’s $2.95bn acquisition of Texas Instruments Inc’s defense business earlier this month (CI No 3,072) only spurred it on to even greater heights, and now the Lexington, Massachusetts-based company has won its bid to acquire the defense assets of General Motors Corp’s Hughes Electronics Corp unit. Raytheon has entered into definitive agreements to bring about a merger under its own name, in a transaction valued at $9.5bn. The amount will be made up of $5.1bn in common stock and $4.4bn in debt – a strategy intended to help General Motors avoid a huge capital gains tax bill. The combined company will have 127,000 employees and revenues of around $21bn, of which $13bn will be in defense electronics, and will bring its current backlog up to $23bn, of which $18bn is defense related. Coupled with the Texas Instruments acquisition, Raytheon predicts that it will see a slight dilution in the earnings of the combined company this year, but will begin growing again, though only minimally, the year after. Raytheon chairman Dennis Pickard said the combined businesses would enable the company to address the fundamental changes to the defense industry required by the end of the Cold War and resulting decline in US defense procurement budgets that have made consolidation inevitable. The strategic combination, he said enables us to address those changes head-on and to grow in the best segment of the defense industry – defense electronics. Resources would be made available to pursue new technology opportunities in defense and in our commercial businesses he said. Hughes and Raytheon have worked together in the past on such projects as the Standard Missile Company and the MEADS Medium Extended Air Defense System. Hughes supplies defense electronics for Naval systems, airborne and ground-based radars, missiles, tectical communications and training simulators and services. It also supplies air traffic control systems, global positioning systems, infrared/electro- optics and monolithic microwave integrated circuits. The transaction is expected to be completed by mid-year.