Defense giant Lockheed Martin Corp. formally completed its long-awaited purchase of the 51 percent of Comsat Corp. it did not already own yesterday, and company executives said Comsat's satellite communications networks are expected to provide significant growth opportunities.
Lockheed projected yesterday that the new business will generate $1 billion in revenue this year. Last year, Comsat generated $618 million in revenue.
Comsat's 2,200 employees and its assets have been merged with Lockheed's existing telecommunications services division. The newly formed subsidiary will operate as Lockheed Martin Global Telecommunications in the United States and as Comsat International overseas.
"The worldwide demand for telecommunications services is growing rapidly, and we've created a new force in the marketplace to unlock the value of our telecommunications assets for the benefit of shareholders," said John V. Sponyoe, chief executive officer of LMGT.
Vance Coffman, chairman and chief executive officer of Lockheed, said the company was "anxious" to expand LMGT's role in the communications marketplace.
Executives of the two Bethesda-based companies praised Betty C. Alewine, Comsat's president and chief executive officer, who is retiring after 14 years with the company, for her role in ensuring a smooth transition in the $2 billion merger.
The acquisition is part of Lockheed's efforts to diversify beyond the design and manufacture of military aircraft, weapons systems, rockets and aerospace products. In buying Comsat, Lockheed gets one of the top-tier satellite communications companies, which has seen revenue climb recently.
Second-quarter revenue up
For its second quarter, which ended June 30, Comsat said revenue rose 8 percent over the second period last year to $169 million. It booked net income of $6.6 million in the quarter.
Under the deal, Comsat shareholders received one share of Lockheed for each share they held. The value of the share exchange was estimated by Lockheed yesterday at $790 million. Lockheed shares closed yesterday at $28.38, down 38 cents.
Sponyoe said yesterday that Lockheed may sell shares in the unit to the public in 12 to 18 months.
Lockheed gains three satellite systems in orbit as well as the network of earth stations to which they are linked. They provide telephone, data, Internet, video and audio communications services for corporate customers and satellite and communications research laboratories.
A different focus
Lockheed said LMGT would focus on providing: e-commerce and communications networking services for the banking, retailing, manufacturing and other industries; satellite services for high-speed voice, Internet and multimedia communication; and systems and technology design and consulting for wireless communications and security.
The deal took two years to complete, largely because it required Congress to amend the Communications Satellite Act of 1962, which barred private parties from owning more than 49 percent of Comsat.
Comsat was originally chartered by Congress as part of INTELISAT, the international satellite consortium. Lockheed becomes INTELISAT's largest shareholder.
Yesterday, the FCC gave the green light for INTELISAT to begin offering services to the U.S. market next year.
Lockheed completed a cash tender for a 49 percent stake in Comsat in September. On Monday, the last regulatory hurdle was cleared when the Federal Communications Commission approved Comsat's transfer of its satellite communications licenses to Lockheed.