Texas investor Harold C. Simmons disclosed on Tuesday that he intends to increase his stake in Lockheed to 15% or more from his current holding of 10.6%, raising anew the possibility of a takeover fight.
Simmons, a billionaire who controls several small Dallas firms, has been acquiring Lockheed shares throughout this year, saying only that the stock was for investment purposes. But the moves have prompted Calabasas-based Lockheed to adopt a number of takeover defenses, including a poison pill plan and an employee stock ownership program.
So far, Simmons' investment in Lockheed has done poorly. He has accumulated losses of $70.4 million on the 6.74 million shares that he purchased for $320 million, a decline in value of 22%.
Simmons has paid an average of $47.45 per share. Lockheed closed Tuesday at $37, down substantially over the past week on news that it will take a $300-million charge against fourth-quarter profit.
Some analysts speculated that Simmons might be seeking to recoup some of those losses by hoping for an upturn in price of his new shares, a strategy known as averaging. Simmons declined to comment Tuesday.
Simmons' disclosure came in the form of a letter Tuesday to Lockheed Chairman Daniel M. Tellep, indicating that he planned to increase his shares beyond the 15% threshold that requires disclosure under the Hart-Scott-Rodino Antitrust Improvements Act. In the letter, Simmons declared his intention to increase his holdings through NL Industries, which he controls through a trust.
Lockheed officials declined to comment beyond a statement disclosing the letter.
Despite the Simmons looming moves on Lockheed, securities analysts discounted the likelihood of an unfriendly takeover effort against the firm.
"I just don't see a takeover of Lockheed at this time," said Lawrence Harris of Bateman Eichler, Hill Richards, a Los Angeles brokerage.
Harris said Lockheed already has $1.7 billion of debt and the prospect of taking on more borrowings through a hostile takeover will be a major deterrent.
Peter Aseritis, an analyst at First Boston, said Lockheed has significant operational problems, including major losses on its development contract for the Navy P-7A submarine patrol aircraft and on its subcontract from McDonnell Douglas to build the wings for the C-17 Air Force cargo jet. Lockheed is also one of the top Star Wars contractors at a time when the program is rapidly losing political support.
"None of these things would really make you want to own Lockheed," Aseritis said. "What these outsiders see in the company, I don't know."
Analysts also raised doubts that the Pentagon would permit a hostile takeover of Lockheed, the top prime contractor for research and development. It also has numerous top secret aircraft and spacecraft programs.
Last April, Lockheed began a major restructuring that included formation of an employee stock ownership plan that will hold 17% of the company's common shares. It also decided to sell off some smaller operations and dispose of some valuable Burbank real estate.
Earlier, the company adopted a poison pill defense, which allows shareholders to buy newly issued stock at a discount if anyone buys 20% or more of the common stock.