FTC OKs Lockheed purchase of Loral Approval vote is 5-0 after Md. giant eases antitrust worries

April 19, 1996|By Ted Shelsby | Ted Shelsby,SUN STAFF Bloomberg Business News contributed to this article.

The Federal Trade Commission yesterday approved Bethesda-based Lockheed Martin Corp.'s $9.1 billion acquisition of the bulk of Loral Corp. after Lockheed agreed to certain restrictions intended to ensure fair competition.

FTC commissioners voted 5-0 in favor of the acquisition of the New York company that is the nation's fifth largest defense contractor.

The restrictions to which Lockheed agreed address the government's concerns that the purchase might violate antitrust laws by reducing competition for satellites, fighter aircraft and other military projects.

The FTC's action came within hours of the Defense Department's acceptance of the transaction that will enhance Lockheed Martin's position as the nation's largest defense and aerospace company. The Pentagon examines all mergers and acquisitions of large military contractors to ensure that there is adequate competition to guarantee it a fair price on military equipment.

By adding Loral, Lockheed Martin will boost its sales by 30 percent to about $30 billion a year. It will pick up another 30,000 employees, bringing its total work force to 190,000. Under terms of the agreement with the FTC, Lockheed will abandoned a plan to provide technical assistance -- at cost -- to the new satellite company, Loral Space & Communication Corp. This is the portion of Loral not being purchased by Lockheed Martin.

The agreement also prohibits Lockheed from increasing the 20-percent stake in Loral Space that was part of the merger agreement.

Loral Chairman and CEO Bernard L. Schwartz will be allowed to serve as Lockheed Martin's vice chairman, while remaining as chairman of the new Loral Space company. The settlement bars Mr. Schwartz -- and anyone serving as director or executive of both companies -- from participating in decisions involving Lockheed Martin's space businesses, where the companies *T might compete.

Lockheed Martin also agreed to sell a small contract that it had with the Federal Aviation Administration to evaluate bidders, including Loral, that are vying for contracts to build air traffic control equipment.

Loral is a major supplier of air-traffic systems to the FAA. The FTC said that without the divestiture, Loral could have gained sensitive information about its competitors. For the same reason, the FTC order requires Lockheed Martin to build "firewalls" that prohibit information sharing among some units that work with other defense contractors on some projects.

Loral units that provide parts for Pentagon tactical fighter aircraft -- in cooperation with Lockheed Martin competitors -- are barred from sharing information with Lockheed Martin divisions that build the planes.

Loral divisions that make communications systems for unmanned aerial vehicles, small planes equipped with television cameras that are used to spy on enemy troop movements, are also prohibited from sharing information about competitors with the Lockheed Martin divisions that make those vehicles.

"This order ensures that the Lockheed Martin/Loral merger will not cause higher prices or lower quality for the defense and space industries, or result in higher costs to the [Pentagon] or American taxpayers," said William J. Baer, director of the FTC's Bureau of Competition.

Charles P. Manor, a spokesman for Lockheed Martin, said the purchase of Loral helps balance Lockheed's business portfolio. He said it increases the company's involvement in the defense electronics industry and the systems integration business, which puts together complex defense systems such as those used to defend ships from attack.

The FTC's approval clears the way for the companies to complete the transaction by midnight Monday, the deadline set for shareholders to tender their stock.

Under terms of the acquisition, Loral shareholders are to receive $38 in cash for each share held. They will also receive one share of stock in Loral Space & Communication Corp. for each share of Loral stock currently held.

Pub Date: 4/19/96

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