UPDATE 1-Harris and L3 to merge to become sixth-largest U.S. defense contractor

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NEW YORK, Oct 14 (Reuters) - Harris Corporation and L3 Technologies have agreed to an all-stock merger, creating the United States' sixth-largest defense contractor, the companies announced in a joint statement on Sunday.

Increased defense spending under U.S. President Donald Trump and the Republican-led Congress is driving contractors to pursue mergers so they have more scale to bid on bigger projects, spanning everything from upgrading outdated computer systems to space exploration.

In August, Trump signed a defense policy bill that authorizes $639 billion in spending for such things as buying weapons, ships, aircraft and paying troops.

The all-stock deal values L3 at $15.7 billion, slightly above its market capitalization as of the end of trading on Friday of $15.3 billion. The deal will create a military communications and defense electronics conglomerate with a market value of about $34 billion.

"This merger creates greater benefits and growth opportunities than either company could have achieved alone," L3 chief executive Christopher Kubasik said in a statement.

The combined company, L3 Harris Technologies, Inc., will be the sixth largest defense company in the United States by revenue and a top 10 defense company globally, with approximately 48,000 employees and customers in over 100 countries, the companies said.

The combined company is expected to generate net revenue of approximately $16 billion, EBITDA of $2.4 billion and free cash flow of $1.9 billion, the companies said.

L3 holders will get 1.3 shares of Harris common stock, currently valued at about $201.33, for each share of L3.

The merger follows a rash of deals over the past 18 months among defense contractors.

Last year, United Technologies Corp agreed to acquire Rockwell Collins for $30 billion, and in March, TransDigm Group continued its acquisition spree with a $525 million deal for Extant Components Group. (Reporting by Jarrett Renshaw and Chris Sanders; Editing by Andrea Ricci and Rosalba O'Brien)