Lockheed to shed materials company $750 million in cash will ease debt burden

July 27, 1996|By Ted Shelsby | Ted Shelsby,SUN STAFF

Lockheed Martin Corp. announced plans yesterday to split off the 81 percent interest it still holds in Martin Marietta Materials Inc., a producer of construction aggregates, principally crushed stone used in highway construction.

Norman R. Augustine, vice chairman and chief executive of Lockheed Martin, said the move would enable the

Bethesda-based company, best known as a defense and

aerospace contractor, "to better focus on its core technology businesses."

"It's a good move," said Paul H. Nisbit, president of JSA Research in Newport R.I., which concentrates on the aerospace industry. "It will enable them to generate about three-quarters of a billion in cash and apply that to their substantial debt. Their debt is one of the weak points of the company."

Lockheed has accumulated about $13 billion in debt through acquisitions, including the purchase earlier this year of the defense electronic business of Loral Corp. for $9.1 billion.

Through mergers and acquisition, Lockheed Martin has emerged the world's largest defense and aerospace company, with sales of $22.85 billion and 190,000 employees.

rTC Martin Marietta Materials is based in Raleigh, N.C. It has about 4,000 employees and operations in 20 states. It has four aggregates sites in the Hagerstown and Frederick areas, said Stephen P. Zelnak Jr., president.

"We have been growing at a pretty good pace," said Zelnak. The company posted sales of $664 million last year and net income of $67.6 million. That compares with sales of $602 million and income of $58.4 million in 1994.

Charles P. Manor, a spokesman for Lockheed Martin, said the company's debt-to-capital ratio is 67 percent. "Our goal is to lower this to 60 percent by the end of the year cut it by an integral of 10 each year thereafter," Manor said.

Augustine said the proposed split-off would provide Martin Marietta Materials "an increased ability to pursue its growth strategy by facilitating the use of its common stock to finance acquisitions."

The split-off would be achieved through an exchange offer in which Lockheed Martin stockholders would be given an opportunity to exchange some or all of their Lockheed Martin common stock for Martin Marietta Materials common stock held by Lockheed Martin.

The transaction is subject to review by the Securities and Exchange Commission. Depending on the market conditions (the value of the stock of the two companies holding firm), the split-off is expected to be completed in the fourth quarter.

Wall Street seemed to favor the proposal. Lockheed Martin closed at $81.75 a share, up $1.125. Martin Marietta Materials closed at $23.125 a share, up 62.5 cents.

Pub Date: 7/27/96

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