Comsat Shares Fall
Wednesday September 8 3:24 PM ET
NEW YORK (Reuters) - Shares of Comsat Corp. (NYSE:CQ - news) fell Wednesday as Lockheed
Martin Corp.'s (NYSE:LMT - news) efforts to complete its $2.2 billion acquisition of Comsat faltered.
Shares of Comsat were down 3-1/4, or 10 percent, at 30-1/2 in the afternoon, a day after Lockheed said
it had been unable to obtain the assurances it needs to divest its stake in Loral Space & Communications
Ltd (NYSE:LOR - news). .
The divestment of Lockheed's stake in Loral -- which stands at about 45.9 million shares, or 16 percent of
Loral -- is seen as a necessary step for Lockheed to secure antitrust approval from the U.S. Department
of Justice for the Comsat acquisition.
``The arbs are bailing. They are worried that either the deal is going to get pushed out further or Lockheed
is going to call it off,' said Brian Barish, a portfolio manager for Cambiar Investors, which holds about 1.2
million shares, or 2.4 percent, of Comsat.
In a filing Tuesday with the Securities and Exchange Commission, Lockheed said its plans to sell the Loral
stake involved receiving assurances from Loral, but it had been unable to obtain those assurances.
A spokeswoman for Loral said the company is continuing to work with Lockheed on the divestiture of the
stake under terms negotiated with the Department of Justice.
``We're in discussions with them on how to divest the stock over two years as stipulated (by the Justice
Department),' she said.
William Kidd, satellite analyst at C.E. Unterberg Towbin, said it is unclear whether Lockheed's merger
with Comsat could be completed if Lockheed could not sell its stake in Loral.
``On the surface, our opinion is that the merger cannot proceed without the divestiture because of DOJ
antitrust concerns, but this is not entirely clear,' he said in a note to investors.
Lockheed, the nation's largest defense contractor, has said Comsat, a wholesaler of satellite
telecommunications services to phone companies, would be a key to growing its newly created global
telecommunications unit.
Under its agreement with Comsat, Lockheed must complete the first half of the acquisition -- a cash tender
for 49 percent of Comsat for $45.50 a share -- by September 18. If the tender were not completed by
then, the parties could agree to extend the tender or walk away from the deal.
The second half of the agreement calls for Lockheed to buy the rest of Comsat in a one-for-one stock
swap.
Jay Ziegler, a spokesman for Comsat, said the company is pursuing efforts to obtain antitrust approval for
the deal.
``We are pursuing another track with the Department of Justice to ensure that we have addressed all of
their concerns with regard to potential antitrust issues,' he said.
A Lockheed spokesman said the company is still working to obtain the regulatory approvals it needs to
complete the Comsat acquisition. |
