Print

Email story

Comment

Letter to the editor

L-3 to buy contractor Titan for $2-billion

NEW YORK - L-3 Communications Holdings Inc., a maker of satellite and marine communication equipment, is buying defense contractor Titan Corp. for nearly $2-billion in a cash deal that will give it a major stake in serving U.S. military and intelligence agencies.

San Diego-based Titan is L-3's largest acquisition and will boost the company's ability to compete as a prime contractor for government business, coming at a time when spending on defense equipment and technology continues to grow.

Frank Lanza, L-3's chief executive officer, said Friday that while L-3 and Titan operate in the same business segment, the companies are focused on certain niches that complement, rather than compete with, each other.

"There just aren't many companies left in that mezzanine area that you can make an acquisition, particularly a company that is so complementary to L-3 and which we don't compete with at all," Lanza told analysts on a conference call. "We don't compete with Titan. We might have had one competition in the last six or seven years."

New York-based L-3 agreed to buy up all of Titan's shares at $23.10 apiece in cash for about $1.97-billion. L-3 is also assuming about $680-million in debt as part of the deal, which is expected to close during the second half of 2005.

The offer is a slim 1.4 percent premium to Titan's Thursday closing price of $22.79, its highest price in almost four years, but tops a $20-per-share bid from defense contractor Lockheed Martin Corp. that Titan accepted before that deal collapsed in mid 2004.

Speculation over a possible deal lifted Titan's stock in recent weeks, but L-3's bid came in below analysts' expectations and sent shares falling 32 cents to close at $22.47 on the New York Stock Exchange. Meanwhile, L-3 shares jumped $3.12, or 4.4 percent, to $74.15.

Titan's board unanimously approved the deal, which is pending clearance from regulators and Titan shareholders.

Titan, which provides technology services and supplies translators and interrogators to the military, previously agreed to be acquired by Bethesda, Md.-based Lockheed, but a federal probe into claims that Titan employees had bribed foreign officials to win contracts ultimately derailed the transaction last year.

[Last modified June 4, 2005, 06:14:28]