| sandstorm03 |
NEW YORK - L-3 Communications Holdings Inc., a maker of satellite and marine communication equipment, said Friday that it is buying defense contractor Titan Corp. for nearly $2 billion in a cash deal that will give it a major stake in servicing U.S. military and intelligence agencies.
Titan is L-3's largest acquisition to date and will step up the company's ability to compete as a prime contractor for government business, coming at a time when spending on defense equipment and technology continues to grow.
Frank Lanza, L-3's chief executive officer, said while L-3 and Titan operate in the same business segment, the companies are focused on certain niches that complement — rather than compete with — each other.
"There just aren't many companies left in that mezzanine area that you can make an acquisition, particularly a company that is so complementary to L-3 and which we don't compete with at all," Lanza told analysts on a conference call. "... We don't compete with Titan. We might have had one competition in the last six or seven years."
New York-based L-3 agreed to buy up all of Titan's shares at $23.10 apiece in cash for a total of about $1.97 billion. L-3 is also assuming about $680 million in debt as part of the deal.
The offer is a slim 1.3 percent premium to Titan's Thursday closing price of $22.79, its highest price in almost four years, but tops a $20-per-share bid from defense contractor Lockheed Martin Corp. that Titan accepted before that deal collapsed in mid-2004.
Despite weeks of speculation over a possible transaction, investors saw L-3's offer as too low and drove down Titan shares 34 cents to $22.45 in afternoon New York Stock Exchange trading. Meanwhile, L-3 shares jumped $3.19, or 4.4 percent, to $74.22.
San Diego-based Titan's board has unanimously approved the deal, which is pending clearance from regulators and Titan shareholders. L-3 said it expects the acquisition to close during the second half of 2005.
Titan, which provides technology services and supplies translators and interrogators to the military, previously agreed to be acquired by Bethesda, Md.-based Lockheed, but a federal probe into claims that Titan employees had bribed foreign officials to win contracts ultimately derailed the transaction last year.
Lockheed originally offered $22 per share, or $1.8 billion plus assumed debt, but reduced its bid to $1.66 billion after twice extending a deadline for Titan to settle the allegations. Last June, Lockheed scrapped the deal, citing "uncertainty" surrounding the claims.
Earlier this year, Titan pleaded guilty to violating federal anti-bribery laws and agreed to pay more than $28 million to settle allegations that it sought to influence elections in Benin in exchange for higher management fees on a telecommunications project.
On Friday, Titan also said it settled several class-action and derivative lawsuits in California and Delaware stemming from the foreign bribery probe. L-3, which said the acquisition is contingent on the settlement, estimated the settlement cost at $62 million.
L-3 said acquiring Titan will help broaden its offerings to a number of government customers, including additional business from the Navy.
"Navy is a major customer of Titan ... That expands our Navy base because we are mainly tied into the Navy in areas of training and simulation," Lanza said on the conference call. "We do not have a lot of involvement or product in the Navy."
Lanza added that three-quarters of Titan's 12,000 employees already have U.S. government security clearances. About 5,000 of those have special or top-secret clearance, "an asset you can't price because ... it takes two years to get somebody cleared in that world."
The acquisition is projected to add about $2.7 billion in annual sales, and will boost earnings by 5 cents per share in 2005 and 25 cents per share for the year ended Dec. 31, 2006, L-3 said.
L-3, which has about 44,200 workers, posted net income of $381.9 million on revenue of $6.9 billion in fiscal 2004.
For the same year, Titan recorded a loss of $38.4 million on sales of $2.05 billion.
http://news.yahoo.com/s/ap/20050603...ibDI5BHNlYwNicw
my company, they should let me take over :D |
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