CQ , very interesting edi
Comsat Shares Rise; Lockheed Buy Wins U.S. Clearance (Update1)
Comsat Shares Rise; Lockheed Buy Wins U.S. Clearance (Update1) (Adds in 2nd paragraph that
company lawyers have been notified; updates shares.)
Washington, Sept. 16 (Bloomberg) -- Comsat Corp. shares rose as much as 14 percent on a report that
the U.S. Justice Department won't block Lockheed Martin Corp.'s acquisition of the satellite-service
provider.
Justice Department officials told company lawyers this morning that they will let the combination
proceed, people familiar with the case said. That decision clears Lockheed, the world's largest defense
contractor and a satellite maker, to complete its tender offer for 49 percent of Comsat's shares this
week.
Comsat shares rose 3 7/16 to 30 15/16 in morning trading after touching 31 1/2. They had fallen more
than 22 percent since Sept. 3, when Lockheed disclosed problems with the Justice Department
review. Lockheed shares fell 9/16 to 34 7/16 today. ''The risk looks much lower today than it did
yesterday,'' said David Cohen, a principal at San Francisco's Farallon Capital Management, which
owns shares of Comsat.
Lockheed offered almost a year ago to pay $45.50 a share for a minority stake in Comsat and acquire
the rest of the company later in a stock swap.
A key question for investors now is whether Lockheed will go through with its tender offer, after the
Federal Communications Commission took a pair of steps yesterday that could reduce Comsat's value.
The FCC voted to end the company's exclusive right to provide access to Intelsat, a global,
inter-governmental satellite organization. The agency also limited the surcharge Comsat can impose on
customers to cover the expenses of its international coordination and regulatory work.
Companies such as AT&T Corp., MCI WorldCom Inc. and broadcast television companies pay Comsat
to transmit international telephone calls and video services over the Intelsat system.
Lockheed, based in Bethesda, Maryland, said it is studying the FCC's decision. Comsat declined
comment.
Congressional Battle
The company also faces a battle in Congress, which must change the law before Lockheed can buy
the rest of Comsat.
The Justice Department decision, nonetheless, would remove a key obstacle to Lockheed's bid to
move into the fast-growing market for satellite services and take advantage of the high margins in that
business. Selling satellite access to phone companies, for example, would be more profitable to
Lockheed than just making and launching satellites.
Lockheed and the Justice Department at one point had an agreement under which Lockheed would
sell its 14 percent stake in Loral Space and Communication Ltd., the No. 2 U.S. satellite-
communications company. On Sept. 3, Lockheed said it hadn't been able to reach an agreement with
Loral to sell the stake.
Lockheed and Comsat then decided to press for antitrust clearance without sale of the Loral stake,
people familiar with the case said.
The Justice Department sign-off would clear Lockheed to acquire the rest of Comsat, as well as the
minority stake, as long as the companies complete the second stage of the transaction within a year.
The two companies asked the Justice Department to review both parts of the transaction
simultaneously. <eom> |
