Comsat to acquire maker of satellite equipment

February 01, 1994|By Michael Dresser | Michael Dresser,Sun Staff Writer

Comsat Corp., a Bethesda-based satellite communications company, said yesterday that it has agreed to acquire a Northern Virginia-based manufacturer of satellite equipment in a $150 million deal that is expected to open new opportunities for Comsat in wireless telephone technologies.

The merger would join Comsat with Radiation Systems Inc., a publicly held company based in Sterling, Va. It had sales of $121.8 million during its last fiscal year, compared with $563.6 million for Comsat.

Comsat said that after the merger, its systems integration business, Comsat Technology Services, would merge with Radiation Systems to form Comsat RSI. Radiation Systems Chief Executive Richard E. Thomas would become head of the new division.

Comsat employs 1,644 people, while Radiation Systems has 975 workers. Bruce Crockett, Comsat's chief executive, said that some layoffs were possible as a result of the merger but that it was too soon to say how many.

"It's an excellent fit for Comsat," said David S. Leibowitz, director of research at Republic New York Securities in New York. "You have a significant player in the antenna business, a company whose product is quite well known to Comsat."

The stock market reacted positively to the announcement. Radiation Systems' stock soared $4.125 to $17.625, on more than 10 times its normal volume, while Comsat stock edged up 25 cents to $27.125. Mr. Leibowitz said the sharp rise in Radiation Systems stock showed that Wall Street had been taken by surprise by the announcement.

Mr. Crockett said one reason he engineered the acquisition of Radiation Systems was that the Virginia company was "persistently beating our brains in" as the companies competed for international systems integration contracts.

He said the merger would not be a typical one where the acquiring company imposes its culture on the acquired firm, noting that Radiation Systems' management team would lead the new Comsat RSI. "We're going to acclimatize this division to RSI rather than the reverse," he said.

Comsat RSI, which will have its headquarters in Sterling, will try to make inroads into such markets as cellular phones and an alternative wireless telephone technology called personal communications services (PCS). Mr. Crockett ruled out any attempt to bid for PCS licenses when they go up for auction this spring, saying he preferred to sell equipment to the companies that do win.

Comsat, an important provider of ship-to-shore and other mobile communications, is the largest owner and user of the global Intelsat and Inmarsat satellite communications networks. Radiation Systems manufactures antennas, satellite dishes and other equipment for telecommunications, radar, air traffic control and military uses.

Under the merger agreement, Comsat would swap $18.25 worth of its stock for each share of Radiation Systems. That price is based on the average closing price of Comsat stock over 20 trading days ending five days before the deal's close.

The merger must be approved by Radiation Systems' shareholders and federal regulators. Radiation Systems shareholders are expected to vote on the merger in the second quarter.

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