Carlsbad's Viasat is selling its long-time military tactical radio business to L3Harris Technologies for $1.96 billion — clearing debt from its balance sheet ahead of the launch of its first terabit-class Internet satellite and its pending acquisition of space industry rival Inmarsat.
Link 16 MIDS tactical radios have been a cornerstone of Viasat's government systems business for years. They currently make up 35 percent of its Department of Defense revenue.
Viasat Chief Executive and co-founder Mark Dankberg called the sale "bittersweet." The technology provides secure voice and data communications to the U.S. military and its allies. It has been installed on more than 20,000 military aircraft, ground vehicles, warships and operating bases around the world.
"For over two decades, that business has performed incredibly well and helped establish Viasat's reputation as being able to 'punch above our weight' in the face of daunting competition," said Dankberg in a blog post. "We're proud of the impact that Link 16 has had in supporting U.S. national security, and that of our global allies."
Viasat's investors liked the news. The company's shares surged 27 percent on Monday to close at $38.37 on the Nasdaq exchange.
The sale includes Multifunctional Information Distribution System (MIDS) platforms and next-generation Link 16 terminals and handheld radios, as well as the Link 16-to-space business.
In selling Link 16, Viasat continues to double down on satellite communications and networking. It's an increasingly competitive sector, where SpaceX's Starlink and others aim to disrupt the status quo with mega-constellations of low-earth-orbit satellites that claim to deliver faster speeds without transmission delays — or latency — experienced by high-orbit satellites.
Viasat is fighting back by building three terabit-class geostationary satellites that will give it global coverage, massive capacity, flexibility to direct bandwidth where it's most needed and lower costs per bit.
The first of these satellites is scheduled to launch by the end of this year from Cape Canaveral, Florida. It will provide coverage over the Americas. The second will follow about six months later and cover Europe, the Middle East and Africa. Timing for the third satellite over the Asia Pacific region is uncertain.
Along with these new satellites, Viasat also is in the throes of acquiring Inmarsat. The deal will further increase the size of Viasat's satellite fleet and opens the door to new markets — such as satellite-to-smartphone connectivity.
Regulators are still reviewing the Inmarsat deal. It comes with a hefty price tag —$850 million in cash, $3.1 billion in stock and the assumption of $3.4 billion in Inmarsat debt.
By selling Link 16, Viasat expects to reduce its current debt load by more than 70 percent — giving the company some breathing room ahead of taking on Inmarsat's debt in a capital markets environment "intensely focused on the impact of rising interest rates," said Dankberg.
Link 16 employs 450 workers — primarily in Carlsbad — and generates about $400 million in annual revenue.
L3Harris didn't respond to an email inquiring about its plans for the Link 16 workforce. As part of the transaction, Viasat will transfer three leased offices — two in Carlsbad and one in Australia — to L3Harris, according to a Viasat spokesperson.
Viasat's annual government systems revenue will decline to $700 million after the sale. But it is expected to bounce back above $1 billion once the Inmarsat acquisition closes.
L3Harris is a defense industry giant, with more than $17 billion in revenue and 47,000 employees.
"This acquisition is part of our strategic effort to ensure operators have access to the most advanced, multi-function Joint All-Domain Command and Control solutions available," said Christopher E. Kubasik, chief executive of L3Harris, in a statement. "Viasat's tactical data link product line naturally aligns with our proven communication capabilities, and we are excited to partner with our customers and coalition allies as we modernize the Link 16 enterprise."
This story originally appeared in San Diego Union-Tribune.
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