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EXCLUSIVE

Boeing explores purchase of Mercury Systems: sources

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[April 04, 2014]  By Nicola Leske and Mike Stone

NEW YORK (Reuters)  Boeing Inc <BA.N> is considering buying Mercury Systems Inc <MRCY.O>, a supplier of digital signal and image processing systems to the aerospace and defense industry, according to two people familiar with the matter.

Mercury, which has a market value of roughly $440 million, offers big data processing systems, software and services to companies including Boeing, Lockheed Martin Corp <LMT.N>, Northrop Grumman Corp <NOC.N> and Raytheon Co <RTN.N>.

A move by Boeing to buy one of its suppliers would allow the company to save costs and increase its footprint in commercial aerospace components. It would also allow the Chicago-based company to gain access to Mercury's microprocessor business, which can be used on unmanned aerial vehicles, according to one of the people.

Mercury is a major supplier to Argon ST, the defense manufacturer that Boeing acquired in 2010.


The auction is still in its early stages and there is no guarantee that Boeing will proceed with a binding offer for Mercury, cautioned the people, who asked not to be named because the matter is not public.

While no other prime defense contractors expressed buyout interest, a few private equity firms are involved in the sale process after making preliminary offers recently, the second person added.

Mercury Systems, which hired Evercore Partners Inc <EVR.N> for the sale, is seeking around $500 million, that person said. Mergermarket first reported on March 7, citing industry chatter, that the company was working with Evercore to explore a sale.

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A Boeing spokesman said that the company did not comment on rumors of potential mergers, acquisitions, divestitures or joint ventures. Mercury Systems was not immediately available for comment.

Founded in 1981 and based in Chelmsford, Massachusetts, Mercury Systems reported a net loss of $1.0 million and revenue of $53.1 million in its fiscal second quarter, which ended December 31, 2013.

Mercury shares closed down 1.2 percent at $13.23 on Thursday.

(Reporting by Nicola Leske and Mike Stone; editing by Soyoung Kim and Phil Berlowitz)

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