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Monday, September 21, 1998
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Lockheed Makes $2.7 Billion Bid To Acquire COMSAT
Lockheed phone home? It looks like Lockheed Martin <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LMT)") else Response.Write("(NYSE: LMT)") end if %> is going full force into the satellite telecommunications business. Last night the Bethesda, Maryland-based aerospace and defense giant announced it would acquire government-sanctioned international satellite communications and digital networking services company COMSAT Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CQ)") else Response.Write("(NYSE: CQ)") end if %> in a two-phase deal valued at around $2.7 billion. In Phase One, Lockheed will make a cash tender offer in the next five days to acquire up to 49% of COMSAT's outstanding stock for $45.50 a share, or a total of about $1.3 billion. That represents a 33% premium to COMSAT's Friday closing price. Phase Two, contingent on a big "IF," will involve a stock swap, valued at around $1.4 billion, exchanging half a share of Lockheed stock for each COMSAT share.
The big IF is whether Congress passes and the President signs legislation (IF they can divert some attention from the ongoing saga of Clinton's sex, lies, and videotape) lifting the existing cap on ownership of COMSAT voting stock by "authorized carriers" designated by the Federal Communications Commission (FCC). Legislation to privatize COMSAT already has been introduced in Congress. COMSAT was created in 1962 to keep AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> from extending its phone monopoly to global satellite communications. It is the U.S. signatory to the International Telecommunications Satellite Organization (INTELSAT), which comprises 143 member nations and serves more than 180 countries, and the International Mobile Satellite Organization (Inmarsat), which provides mobile satellite communications worldwide.
IF the shares are tendered, the law is enacted, and the merger is approved by the FCC and by both companies' shareholders, COMSAT will become part of Lockheed's recently formed Global Telecommunications subsidiary, which Lockheed expects to spin-off at a later point. Even with the passage of a new law allowing privatization of COMSAT, the merger may still face strict scrutiny by FCC regulators. This engagement between Lockheed and COMSAT comes two months after Lockheed and defense contractor Northrop Grumman <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NOC)") else Response.Write("(NYSE: NOC)") end if %> called off their proposed marriage (valued at $8.3 billion) after the Justice Department, instead of blessing the wedding, sued to block the merger on antitrust grounds. Lockheed Martin itself was formed from the merger between Lockheed and Martin Marietta. Lockheed anticipates that this time around the engagement/approval process will take roughly six to nine months.
News to Go
The Wall Street Journal today reported that Indianapolis-based pacemaker manufacturer Guidant Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GDT)") else Response.Write("(NYSE: GDT)") end if %> has tentatively agreed to acquire the Intermedics pacemaker division of Switzerland's Sulzer Medica Ltd. for between $775 million and $850 million. The move would solidify Guidant's No. 2 position in the $4 billion cardiac-rhythm devices market with about 32% market share behind Medtronic Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MDT)") else Response.Write("(NYSE: MDT)") end if %>, which commands around 45% of the market.
AMR Corp.'s <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMR)") else Response.Write("(NYSE: AMR)") end if %> American Airlines, British Airways <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAB)") else Response.Write("(NYSE: BAB)") end if %>, Canadian Airlines, Cathay Pacific Airways, and Qantas Airways this morning announced a global alliance dubbed "oneworld" that will involve sharing passengers and linking frequent-flyer programs. The pact will rival the Star Alliance formed last year by UAL Corp.'s <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UAL)") else Response.Write("(NYSE: UAL)") end if %> United Airlines, Lufthansa, Thai Airways International, and Brazil's Viacao Aerea Grandense, or Varig.
John Edwardson resigned as president and chief operating officer of United Airlines parent UAL Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UAL)") else Response.Write("(NYSE: UAL)") end if %> after it became clear to him that he would not have enough union support to succeed Jerry Greenwald as chairman and CEO when he is expected to retire next July. "United does not need a distracting or disruptive succession process," Edwardson said. Formerly executive vice president at Ameritech <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AIT)") else Response.Write("(NYSE: AIT)") end if %>, Edwardson joined United as president in 1994 and became COO the following year. The company said a new president and COO will be named in the next few days.
In a countermove to AMP Inc.'s <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMP)") else Response.Write("(NYSE: AMP)") end if %> latest maneuver to block a hostile takeover, AlliedSignal <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALD)") else Response.Write("(NYSE: ALD)") end if %> cut its $44.50-per-share cash tender offer in half to 20 million shares, or 9% of AMP's outstanding stock. With strict Pennsylvania merger law in its favor, AMP announced Friday it had lowered the threshold for triggering its "poison pill" to 10% from 20%, thus prohibiting AlliedSignal from acquiring more than 9% of the electrical connectors company. Last week, AlliedSignal said 72% of AMP's common stock had been tendered, showing shareholders have "no confidence" in AMP's management.
Entertainment and media giant Walt Disney Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %> and 43% Disney-owned Infoseek Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEK)") else Response.Write("(Nasdaq: SEEK)") end if %> will announce plans to launch a new website called the "Go Network" (www.go.com) near the end of the year, according to The Wall Street Journal. The Go Network will take over Infoseek's role as a portal service, leaving the Infoseek name on just the company's search and directory services. The Journal also reported that "people familiar with the matter" said Infoseek might change its corporate name to Go Network Inc.
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