Raytheon to Buy TI Missile Division

Raytheon Co. said Monday that it has agreed to buy Texas Instruments Inc.’s missile and defense business for $2.95 billion in cash, raising speculation that it will bolster its defense operations through further acquisitions.

The buyout--Raytheon’s third in the last two years--would strengthen the company’s leadership in defense electronics as it seeks to grow further in an industry that has been consolidating in the years since the end of the Cold War.

“The defense business is changing rapidly and significantly. And recent transactions in the industry have redefined what it now means to be a leader,” Raytheon Chief Financial Officer Peter D’Angelo said.

The deal is expected to increase Lexington, Mass.-based Raytheon’s annual defense electronics sales to $8 billion and its current defense electronics backlog to $9.3 billion, boosting total annual revenue to about $15 billion. No significant layoffs are planned, the companies said.

Both Raytheon and Dallas-based Texas Instrument’s Defense Systems & Electronics Group, to be renamed Raytheon TI Systems, manufacture missiles, sensors and seekers, and aircraft and ground radar, but they do not overlap.

The announcement sent shares in both companies up on the New York Stock Exchange, where Texas Instruments rose 62.5 cents to close at $67.625 and Raytheon gained 25 cents to close at $50.

Analysts have speculated that Raytheon’s defense-related businesses must grow even more to guarantee their survival in a world of fewer and fewer defense firms.