What They Won’t Tell You About the Biggest Defense Merger Ever

0 | By Michael A. Robinson

We’ve been talking for months now about how the defense sector would get a major boost from the election of Donald Trump.

And that’s just what happened.

U.S. defense spending is near all-time highs – projected to grow 20.1% from 2017 to 2020, reaching $988.8 billion. You know that all the defense contractors are lining up at the Pentagon trough to get their share.

I saw Harris Corp. (NYSE: HRS) as the best way to profit from the spending boom, thanks to the firm’s role in advanced defense tech – and delivered that recommendation to members of Nova-X Report. Harris went on to snag an outsized share of new contract awards.

And my readers have made better than 110% gains on that play – so far.
I say “so far” because, clearly, Harris wants more.

Earlier this week, Harris said it will merge with fellow defense-tech titan L3 Technologies Inc. (NYSE: LLL).

Investors quickly grasped the merits of this deal, pushing shares of Harris up by nearly 12% Monday on heavy volume to a fresh all-time high.

This is the biggest deal the defense sector has ever seen. It creates an instant powerhouse in a range of areas, including military radios, top-secret space hardware, and air traffic control systems.

Harris/L3 will join the nation’s elite rank of “prime” defense contractors, meaning it will no longer play a support role on certain major defense systems contracts, and instead play a lead role.

Both Harris and L3 have been known in the industry to spend an outsized portion of sales on R&D. That has helped each firm to offer the strongest product lines in their niches and muscle out weaker rivals.

These firms have little product overlap, and each has been run in a quite lean fashion already. Still, look for Harris to carve out around $500 million in yearly cost savings once the merger is completed early next year.

That all sounds great – but here’s what the mainstream media and Wall Street won’t tell you about this deal.

Harris/L3 are likely to miss out on the one of the most important and biggest chunks of increased defense spending.

They just don’t have the tech capabilities to fulfill the contracts on it.
I’m talking about hypersonics.

Russia and China have taken the lead on developing these weapons – missiles and aircraft that travel at Mach 5 and up. That’s an incredible five miles per second.

That’s become a major threat to the United States.

Secretary of Defense James Mattis says that hypersonic development is now America’s “number one priority.”

President Trump and the Pentagon have allocated at least $140 million to the cause – and dedicated $11.5 billion to boosting our missile defense.

Still, The Wall Street Journal reports, “Pentagon leaders in recent years have become irritated at what they view as a lack of investment by defense contractors to keep the U.S. from falling behind adversaries such as China and Russia in technologies like hypersonic weapons and artificial intelligence.”

That’s not the case with one tiny defense-tech company that’s already far advanced in hypersonics. Most people have never heard of it, but the company’s quietly been ramping up these innovations for years.

It trades at less than $35 – compare that to, say, Lockheed Martin Corp. (NYSE: LMT)’s $330 share price – and its market cap is 1/85th the size of The Boeing Co. (NYSE: BA)‘s.

While it’s small, this company has been a supplier of a wide range of propulsion products to the Pentagon for decades. I’m talking defense platforms that include strategic, tactical, and precision strike missiles, as well as missile defense and precision war-fighting systems.

And now it is the leading-edge developer of the rocket-engine technology that will drive the hypersonic revolution.

This firm’s involvement in hypersonic weapons is so vital to our nation’s safety that I’ve prepared a special briefing on it.

The presentation will give you all the details you need to know – including how and why this company could undergo a 3,877% revenue surge in the near future (more details).

And how its shares could hand investors who make their move now gains of 145% in just the next 12 months.

To view that presentation, simply click here.

Have a great weekend.

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