LOS ANGELES -- Lockheed Corp. rejected yesterday a buyout proposal by Harold C. Simmons, a Dallas investor, saying the plan would require too much new debt.
Lockheed said its board had voted unanimously to reject the proposal, which called for the company and Mr. Simmons, who (( owns nearly 20 percent of Lockheed's shares, to take the company private at $40 a share, or a total of $1.6 billion.
J. Landis Martin, Mr. Simmons' top aide, said he was disappointed with Lockheed's decision.
He said he and Mr. Simmons now will consider their options, including the possibility of waging another proxy contest against Lockheed's management and board. Lockheed defeated a proxy challenge by Mr. Simmons earlier this year.
Mr. Simmons has suffered large paper losses on his investment in Lockheed, whose stock price has fallen in recent years as the outlook for military contractors has dimmed.
Lockheed's shares closed yesterday on the New York Stock Exchange at $30.25, down 37.5 cents. The company's rejection of Mr. Simmons' offer was disclosed after the close of the market.
In rejecting the offer, Daniel M. Tellep, Lockheed's chairman, said the board had "serious doubt about the ability to raise the funds necessary to complete the transaction."
He said there were doubts about the availability of the $2 billion in new and refinanced debt that the Simmons plan would require. In addition, the company said, "The major disruptions associated with pursuing this highly leveraged transaction, without a high probability of success, would be detrimental to all Lockheed shareholders."
Mr. Martin disputed the suggestion that the debt load from the plan would be excessive, saying the debt payments would equal Lockheed's current dividend to shareholders.
Lockheed also made good yesterday on one of the promises it had made to institutional investors in the proxy contest last spring. The company named four new board members, in part to give greater voice to its large institutional shareholders.