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Lockheed acquired titan { September 16 2003 } Original Source Link: (May no longer be active)
http://www.washingtonpost.com/wp-dyn/articles/A16575-2003Sep15.htmlhttp://www.washingtonpost.com/wp-dyn/articles/A16575-2003Sep15.html
Lockheed Martin to Acquire Titan
Capturing Government Technology Market Key to $2.4 Billion Deal
By Renae Merle
Washington Post Staff Writer
Tuesday, September 16, 2003; Page E01
Lockheed Martin Corp. yesterday announced a $2.4 billion deal to acquire Titan Corp. of San Diego, further strengthening its hand in the government technology market.
The deal continues a string of acquisitions in which mid-tier technology companies such as Titan have been acquired by industry giants positioning themselves to take advantage of increased government tech spending.
"Titan provides additional presence within the U.S. government customer base and expands our competencies," Vance Coffman, Lockheed Martin chairman and chief executive, said in a statement. "Our combined capabilities will continue to enhance the Defense Department's transformational systems and focus on the evolving threats that face our country."
In addition to government IT, Titan specializes in homeland security products. While Lockheed also has homeland-security-related businesses, Titan comes with contracts with FEMA, computer simulation of weapons of mass destruction, and the Defense Threat Reduction Agency, said Christopher E. Kubasik, Lockheed's chief financial officer.
The company also specializes in work for intelligence agencies, including the National Security Agency, he said. A majority of Titan's 11,000 employees have security clearances, he said.
"Together we will offer a broader spectrum of system and IT solutions to our customers. As such, I am confident that this match is a winner for our customers and employees," said Titan's chairman, president and chief executive, Gene W. Ray.No layoffs are expected among Titan's 11,000 employees. "We really did buy this business to expand it and to grow it," Kubasik said.
Titan had made some of its own acquisitions in the government arena, including the 2001 acquisition of BTG Inc. It has spent the past few years selling off investments in the commercial sector, said Robert Rubin, a vice president at investment bank Aronson Capital Partners LLC. "They have had an up-and-down performance in the past few years. . . . The commercial business muddied up the waters a little bit, but they got back to a pure-play government firm," which made the company a more attractive acquisition target, Rubin said.
The deal provides a hefty premium for Titan shareholders, who will have a choice of taking $22 in cash or an equivalent amount of Lockheed stock, or a combination. Titan closed at $16.96 a share yesterday but has traded as low as $6.80 in the past year.
That is an approximately 30 percent premium on Titan's closing price but a "far more substantial premium" to the company's six-month average, said Anita Antennucci, managing director of investment bank Houlihan Lokey Howard & Zukin.
The Titan acquisition mirrors General Dynamics Corp.'s recent acquisition of Veridian Corp. for $1.5 billion earlier this year, Antennucci said. "They are both among the largest second-tier companies with real strength" in defense electronics and communications technology, she said.
If approved by Titan shareholders and antitrust regulators, the deal will close in early 2004, according to a Lockheed statement. The purchase includes the assumption of $580 million of Titan's debt.
The deal is also apart of Lockheed's strategy to deploy more of its cash, Kubasik said. Lockheed also announced yesterday that it would double its quarterly dividend to 22 cents a share and that it had bought back more than 6 million shares earlier this year.
© 2003 The Washington Post Company
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