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Technology Stocks : LOCKHEED MARTIN, (LMT) -- Ignore unavailable to you. Want to Upgrade?

To: Jimbo Cobb who wrote (429)	9/22/1998 3:20:00 PM
From: Wally Mastroly	Read Replies (1) \| Respond to of 732

From Aerospace Daily: Comsat buy would make Lockheed Martin turnkey satellite company- Lockheed Martin Corp.'s move to acquire Comsat Corp. for about $2.7 billion, announced Sunday, puts it closer to becoming a turnkey provider of satellite services. Vance Coffman, Lockheed Martin chairman and chief executive officer, said the initiative, which must still be approved by the shareholders of both companies and the Federal Communications Commission, "will unite two advanced technology companies with complementary capabilities in the commercial, space-based telecommunications industry. The new subsidiary will benefit communications users in the United States and around the world." Marco Caceres, an analyst with the Teal Group of Fairfax, Va., said the move was inevitable. "It really makes them a complete player," he said in an interview yesterday. "...With Atlas and Titan [launch] vehicles, they really have a large launch service presence. With the acquisition GE Astrospace, they essentially became one of top three makers of commercial satellites in the world along with Loral and Hughes. Now with this, it definitely puts them in the top five of providers worldwide." While Hughes and Loral lead in building satellites, neither has a strong launch presence, Caceres said. Boeing provides the competition for launch services, but trails in building and services. "If you look at overall presence, Lockheed Martin is on top." He said that "Service is where real money is to be made. It's a follow-on to efforts [Lockheed Martin has] made in the last year to get into the services end. ... This is ... a major leap. They're acquiring a company that is the official U.S. signatory to Intelsat. Right away they become kind of a prominent provider worldwide." And, he said, with strong competition in launch services, satellite building and satellite services, the Comsat move would probably not draw too much government scrutiny. But Jon Kutler of Quarterdeck Investment Partners in Los Angeles said Lockheed Martin's sheer size would still attract some government attention. "They really can't do anything without raising eyebrows in Washington," he said. "This will certainly be something that receives close scrutiny, but you've got to believe that after the Northrop Grumman fiasco that they've done their homework on this one." Full circle for Lockheed Martin Kutler said the Comsat play brings Lockheed Martin full circle. When Lockheed Martin acquired Loral, they carved out the space business and turned it over to Loral space, because Lockheed felt strategically and financially that they didn't want to go in that direction," Kutler said. "Now, a couple years later, they're circling back and buying Comsat, a continuation of the Loral space strategy if they had decided to buy all of Loral." Moody's Investors Service, meanwhile, said it was placing the ratings of Lockheed Martin and Comsat under review for possible downgrade, with about $8 billion of debt affected. Its review of Lockheed Martin will focus on implications of the transaction for operating outlook, future cash flows, plans for debt reduction, funding sources of the transaction and the possibility for additional sizable acquisitions or investments. Comsat is being reviewed due to the strategic role it will play in Lockheed Martin's future business decisions. Lockheed Martin said the acquisition would be carried out in two phases. In the first part, it would make a cash tender offer within five business days to buy up to 49% of Comsat's outstanding common stock at $45.50 per share, or some $1.3 billion. Comsat closed Friday at $34.06. In Monday's trading, Lockheed Martin loss $4.88 to close at $95.13, while Comsat gained $.25 to close at $34.38. The FCC must approve the "merger of a common carrier subsidiary of Comsat into" Lockheed Martin's new Global Telecommunications unit, and it must designate the unit as an "authorized carrier" under the 1962 Communications Satellite Act, a process the companies expected to take six to nine months. The second phase, "the merger of a second Lockheed Martin subsidiary and Comsat," depends on several conditions, "including enactment of federal legislation to remove the existing restrictions on authorized carrier ownership of Comsat voting stock." This phase, involving "an exchange of Lockheed Martin common stock for Comsat common stock at a ratio of 0.5," would be valued at about $1.4 billion....