Pentagon To Scrutinise Raytheon Plan To Take Over Hughes

The Pentagon says it will closely inspect Raytheon Cos plans to buy Hughes Aircraft Co and the defence business of Texas Instruments Inc with an eye on competition in the air-to-air missile industry.

That one will require a very, very careful look, defence undersecretary Paul Kaminski told reporters in an interview this week on mergers in the shrinking US defence industry.

Most of our capability in the country as a prime (contractor) in air-to-air missiles will be held in that combination, he said, adding that not only finished missiles but production of key components would be held by an expanded Raytheon.

 

Raytheons plans to acquire the Hughes Aircraft division of Hughes Electronics Corp, a unit of General Motors, for $9.5 billion and Texas Instruments defence business for nearly $3 billion have raised some antitrust concerns among government and industry officials.

The Pentagon advises the Federal Trade Commission and other government agencies on mergers but has no veto over the final decision.

Kaminski, who plans to leave the Pentagon this spring as the executive in charge of acquisition and technology, expressed less worry about the proposed $15 billion merger of Boeing Co. and McDonnell Douglas Corp., which is also being checked by the FTC and the Pentagon.

I would say for the most part that this merger is more of the character of a horizontal integration than a vertical, he said, adding that McDonnells warplane divisions might benefit from Boeings experience in commercial aircraft production.

Kaminski did not say whether the Pentagon might recommend changes in the Raytheon deal. But defence analysts told the Washington Post that the new firm would also gain near monopolies in areas such as night vision equipment, sensors on spy satellites and in some radar components.

Defence Secretary William Cohen said last week in written testimony to the Senate Armed Services Committee that we may have lost something in the process in industrial mergers over the last several years.

We clearly have less opportunity for competition in many defence sectors, and that means we will have to develop new acquisition strategies to insure best value for the government, Cohen said in the comments, made before his confirmation by the Senate.