RAYTHEON MAKES 3 : HUGHES PURCHASE PUTS WEAPONS MAKER NEAR TOP.

Byline: James Sterngold The New York Times

In what is expected to be one of the last major takeovers in the weapons industry, Raytheon Co. announced Thursday that it had agreed to acquire the military businesses of Hughes Electronics Corp. from General Motors Corp. for the equivalent of $9.5 billion.

Under the terms of the extremely complex deal, which followed a lengthy auction process, Raytheon - a manufacturer of missiles, radar and appliances, based in Lexington, Mass. - will assume about $4.4 billion in debt that will be issued as part of the transaction and will pay about $5.1 billion in the form of newly issued stock.

The new company will produce such weapons as air-to-air missiles, anti-tank weapons, ground and air radar, communications systems, and sonar and mine-hunting equipment.

Raytheon also operates a large construction company and produces Amana refrigerators and Speed Queen laundry equipment.

There have been about $50 billion in mergers involving military contractors in the last four years, nearly $40 billion worth in the last year. There had been 15 major military contractors seven years ago.

With Thursday's announcement, three huge, dominant weapons producers have emerged: Boeing Co., Lockheed Martin and now Raytheon, each with $20 billion or more in annual revenues.

Raytheon's complex transaction for the Hughes military businesses - actually a series of related transactions - was designed to help General Motors avoid paying what might have been hundreds of millions of dollars in taxes, a boon to its shareholders at the expense of the Treasury.

The transaction is expected to mean perhaps hundreds of layoffs at the combined Raytheon and Hughes companies, whose stated aim is to become a more efficient competitor for a shrinking number of weapons contracts.

On the news, Raytheon's share price rose $1.25, to $48.25, while General Motors' stock rose 50 cents to $60.625. The General Motors H shares, which track the value of the Hughes Electronics businesses, were unchanged at $62.625.

The combined companies have $21 billion in revenues and 127,000 employees. Raytheon ranks as the nation's sixth largest military contractor, and the Hughes military business is fourth.

The deal requires approvals from the Justice Department and the Pentagon, but most experts expected that the takeover would go through as proposed. GM Chairman John F. Smith Jr. said that he was confident all the regulatory approvals would be received.

THE BIG GUNS

The biggest defense contractors in the country, as defined by the value of 1995 fiscal year Pentagon awards. The list assumes the completion of several takeovers, including Thursday's announced acquisition of the defense business of the Hughes Electronics division of General Motors by Raytheon Co.

1. Lockheed Martin Corp., $10.5 billion.

2. The company created by Boeing Co.'s acquisition of McDonnell Douglas, about $9.8 billion.

3. The company created by Raytheon Corp.'s acquisition of the defense business of the Hughes Electronics division of General Motors and the defense arm of Texas Instruments, at least $5.9 billion.

4. Tenneco Inc., $3 billion.

5. Northrop Grumman Corp., $2.9 billion.

6. General Electric Co., $2.1 billion.

Associated Press 

CAPTION(S):

Photo, Box

Photo: (Color) Raytheon Co. Chairman Dennis J. Picard smiles after announcing Thursday that his firm will buy Hughes Electronics from General Motors.

Associated Press

Box: (Color) THE BIG GUNS (See text)