Loral buys out European partners for $374 million Company seeks to create worldwide satellite system

February 25, 1997|By BLOOMBERG NEWS

NEW YORK -- Loral Space & Communications Ltd. agreed yesterday to buy out its European partners in Space Systems/Loral for $374 million, part of Chairman Bernard Schwartz's vision to create a global satellite communications company.

Loral will buy the remaining 49 percent of Space Systems/Loral from Aerospatiale, Alcatel Espace, Alenia Spazio SpA and Daimler-Benz Aerospace AG for cash and Loral stock. The companies will receive a combined stake in Loral Space & Communications of about 6 percent.

The move comes less than a year after Schwartz orchestrated the sale of Loral Corp. to Lockheed Martin Corp. for $9.1 billion, leaving him free of the defense business and eager to push for a worldwide satellite system. Under his direction, Loral Space raced into China and plans to buy AT&T's SkyNet Satellite Services unit by the end of the month.

"This is an important building block for Schwartz in putting together a satellite telecommunications powerhouse," said Lior Bregman, analyst at Oppenheimer & Co.

Loral, which makes satellites through Space Systems/Loral, will provide satellite communications services through its 34 percent stake in Globalstar Telecommunications Ltd., a joint venture that plans to use 48 satellites to offer telephone service worldwide.

"This investment allows us not only to consolidate our ownership but to preserve the productive strategic relationship we have with our partners," Schwartz said.

While the deal isn't a surprise, it's another step by Schwartz to make his company a premier satellite and satellite-based communications provider. Loral Space and General Motors Corp.'s Hughes division are among the companies blurring the distinction between satellite producer and satellite-service provider.

Traditionally, satellite makers such as Loral, Hughes, Lockheed Martin and many international companies built satellites for others that provided wireless voice, data and video services.

Now, Loral Space and Hughes are offering, or will provide, wireless services. Loral Space and San Diego-based Qualcomm Inc. are the founding partners of Globalstar, which is planning a worldwide wireless communications system based on satellites that Space Systems/Loral will build.

Globalstar plans to be operating by the end of the decade.

Hughes, which is selling its defense operations to Raytheon Co., operates DirecTV, a satellite-TV broadcast service. Bloomberg LP, the parent of Bloomberg News, operates a 24-hour station on DirecTV.

Loral said the Space Systems/Loral transaction, which is expected to close within 45 days, includes $93 million in cash, $131 million in Loral common stock and $150 million in Loral convertible preferred stock.

In exchange for their interest in Space Systems/Loral, the partners, except for DASA, will receive an equity stake in Loral.

Pub Date: 2/25/97

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