Lockheed, U.S. agree to tentative antitrust terms

Accord may help firm with proposed $3.2 billion purchase of Comsat

Aerospace

May 13, 1999|By BLOOMBERG NEWS

WASHINGTON -- Lockheed Martin Corp. has negotiated terms of an antitrust agreement with the U.S. Department of Justice that could help the company move ahead with its proposed $3.2 billion acquisition of Comsat Corp.

The most significant provision would require Lockheed Martin, the world's second-largest aerospace company, to sell its 14 percent stake in another satellite company, New York-based Loral Space & Communications Ltd.

That requirement should not be a stumbling block: Bethesda-based Lockheed Martin said in September that it would consider selling its Loral shares to raise money for the Comsat acquisition. Terms of the possible antitrust agreement were disclosed by Lockheed Martin in a proxy statement filed with the Securities and Exchange Commission.

In December, the Justice Department requested additional information on the Comsat purchase, a sign that the acquisition would get a close look for possible antitrust concerns.

But an analyst said the transaction does not raise major antitrust issues.

Comsat "is a service company, whereas Lockheed Martin is more positioned in manufacturing," said Todd Ernst, an aerospace analyst at Prudential Securities Inc. in New York. "There is very healthy competition" for the satellite services Comsat supplies, he added.

A Justice Department spokeswoman declined to comment.

A Lockheed official also declined to comment on the antitrust review of the purchase of Comsat, which also is based in Bethesda. The company said in the SEC filing that it has negotiated terms with the government "which could form the basis of a consent order that would resolve" an antitrust review.

The agreement is not final, Lockheed's filing said.

Comsat World Systems provides satellite capacity for telephone, data, Internet, video and audio communications services using the global satellite networks of the International Telecommunications Satellite Organization, or Intelsat. Its competitors include Loral and General Motors Corp.'s Hughes Electronics subsidiary.

Lockheed Martin has faced antitrust hurdles in the past. The company abandoned its proposed $10.7 billion acquisition of Northrop Grumman Corp. last year in the face of opposition from the Justice Department and the Defense Department.

The most significant term in the tentative Comsat agreement with the Justice Department is the sale of the 46 million Loral Series A convertible preferred shares that Lockheed Martin currently holds, the filing said.

The sale would have to take place over a two-year period that would start once Lockheed Martin completes its tender offer for Comsat.

Even as Lockheed Martin moves forward with U.S. antitrust officials, it could face questions elsewhere. On April 13, the European Commission's merger task force sent a request for information to Lockheed Martin Global Telecommunications, the SEC filing said.

The task force wants the data to evaluate whether the Comsat acquisition and related transactions require a premerger filing. The companies have gathered the data requested to respond to the letter, although they had determined last year that Comsat's revenue from sales in the European Union were not high enough to require a premerger filing there.

In addition to antitrust clearance, Lockheed Martin must get authorization from the Federal Communications Commission to purchase Comsat shares.

The company must also wait for Congress to amend the Communications Satellite Act of 1962 in order to complete the acquisition.

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