Congress approves sale of Comsat

Measure to allow Lockheed purchase now goes to Clinton

Legislation

March 11, 2000|By Mark Ribbing | Mark Ribbing,SUN STAFF

Lockheed Martin Corp.'s $2.5 billion purchase of Comsat Corp. won final congressional approval Thursday night as the House of Representatives approved by voice vote a bill that would bring important changes to the satellite-communications industry.

The legislation passed in the Senate on March 2 and now goes before President Clinton, who has until March 22 to sign it. The Federal Communications Commission and the Department of Justice also must review the proposed union of the two Bethesda companies.

Analysts said completion of the deal should be fairly easy now that it has survived Capitol Hill. The Clinton administration has not made any statements on the newly passed legislation, but is expected to do so by the middle of next week.

"We don't really see any obstacles going forward," said Steven Hanson of New York institutional research firm Merger Insight.

Big corporate acquisitions normally do not require the blessing of Congress and the White House, but this was never a normal acquisition. Comsat was created by an act of Congress in 1962 to represent the United States in intergovernmental satellite networks.

Seeking to strengthen its satellite-communications holdings, Lockheed Martin announced in September 1998 that it would buy Comsat. Lockheed Martin took control of 49 percent of Comsat on Sept. 18, but could not purchase the rest until Congress acted to change the laws governing Comsat's ownership structure.

The legislation approved by Congress would allow Lockheed Martin to assume full ownership of Comsat, but it would also strip Comsat of key privileges. Currently, communications companies must go through Comsat in order to gain access to the Intelsat satellite network; companies could gain such access directly if the measure becomes law.

The chief executives of the two companies released statements applauding the congressional votes. Lockheed Martin's John V. Sponyoe called the victorious bill "an equitable solution to the long and complex task of satellite reform legislation" and said he expects the deal to close in the summer. Betty C. Alewine of Comsat termed the legislation "balanced and pro-competitive."

Philip Wohl, an analyst with Standard & Poor's in New York, said that while the acquisition is likely to go forward, it is of little relevance because other companies are moving to build global communications systems. "The longer [the deal] drags on, the more nobody cares and the less chance it has of really having an impact," he said. "Other companies are already passing Comsat."

Comsat shares gained 6.25 cents yesterday to $16.375. Lockheed's stock edged down 31.25 cents to $16.8125.

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