Lockheed/Marietta team to buy LTV defense unit

Electronic News, Feb 10, 1992 by Jack Robertson

WASHINGTON -- A joint venture of Lockheed and Martin Marietta has edged out Thomson of France to sign a tentative agreement to acquire the LTV defense operations for a reported $ 350 million to $ 400 million.

Final details are still to be worked out, and any deal must be approved by the bankruptcy court handling the LTV Chapter 11 reorganization.

Sources believed the U.S. joint venture sweetened its offer at the last minute to beat the French aerospace giant. Both Lockheed and Martin Marietta compete head-on with Thomson in missiles and defense electronic systems and are loath to see the French rival strengthen its position in the hard-fought U.S. defense market.

None of the companies last week would reveal the tentative purchase price. Sources following the negotiations believed both the U.S. and French offers were in the $350 million to $4000 million range, after each teamed up to get partners to increase their bids from the original unacceptably low offers. Loral Corp. was a third bidder, but offered only a fire-sale price, and was never a serious factor in the acquisition negotiations.

The Lockheed-Martin Marietta joint venture would operate the LTV defense operations as a separate subsidiary. Yet both are expected to look for synergies and shifting programs among the three entities -- as Lockheed and Marietta seek to strengthen their own operations.

Marietta is expected to quickly move to link the LTV missile programs -- MLRS (Multiple Launch Rocket System), ATACMS (Army Tactical Missile System) and Losat (Line-of-Sight Anti-Tank) with its already extensive missile programs. LTV might also help Marietta salvage its troubled Adat anti-aircraft missile program, slated to be canceled by the Pentagon or become the source for a successor missile.

Lockheed's portion of the joint venture would be in the LTV aircraft business, with large subcontracts for Boeing commercial jetliners and the soon-to-be-curtailed B-2 bomber. However, LTV's stealth technology on the B-2 would dovetail with Lockheed's own extensive stealth capabilities on its F-117 fighter.

The acquisition would cause a marketing shakeup of all three companies in the upcoming Thaad (Theater High Altitude Area Defense) antimissle system. Each so far was planning to bid separately. In fact, LTV has the only existing prototype, the Erint hypervelocity interceptor, already under contract.

Marietta has signed on the McDonnell Doughlas team, and Lockheed has formed its own team with Rockwell, Honeywell and Litton Systems. It was not clear at this early stage whether the partners would rethink their Thaad strategy.

The acquisition would certainly consolidate the competitive defense base for future missile and aerospace bids as LTV capabilities would be linked into the Lockheed and Marietta joint venture, instead of being a separate bidder.

Sources expect Thomson to continue to seek U.S. acquisitions that fit into the firm's missile and defense electronics core business, particularly at the current fire sale prices. With its own French defense market shrinking and the rest of the European defense business tight, Thomson wants to build its base in this country.