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BAE Subsidiary Gets OK to Acquire Lockheed Military Electronics Units

Aerospace: Purchase is expected to make the U.S. operation a top weapons supplier to the Pentagon.

November 25, 2000|PETER PAE | TIMES STAFF WRITER

A U.S. subsidiary of Farnborough, England-based BAE Systems has won approval for the proposed $1.67-billion purchase of Lockheed Martin Corp.'s aerospace electronics businesses, a Lockheed Martin spokesman said Friday.

The U.S. Treasury Department informed both companies Wednesday that it had no objections to the transaction, clearing the way for BAE to complete the acquisition by next week, said Peter Harrigan, a Lockheed Martin spokesman.

"It's the last of the key government approvals and with this, we expect to complete the transaction early next week," Harrigan said.

BAE's purchase of the units, which develop some of the most advanced military electronics technology in the world, would make the company, formerly British Aerospace, one of the Pentagon's top weapons suppliers.

It would also put BAE, one of the world's largest defense contractors, in a territory no other foreign-owned company has ever occupied as the Pentagon pushes to open the defense industry to more foreign companies.

The deal when completed will mark the first major success in the Defense Department's three-year program to bolster cooperation among U.S. and European defense contractors, analysts said. Pentagon officials have said that the program would reduce costs, spur purchases of U.S.-made weapons and increase the ability of North Atlantic Treaty Organization members to train and fight alongside U.S. forces.

The purchase, which includes Lockheed Martin's Sanders electronics unit, also marks the meteoric but quiet ascension of BAE's U.S. subsidiary, BAE Systems North America, as one of the nation's largest defense contractors, closely rivaling behemoth Northrop Grumman Corp.

The U.S. operation, headquartered in Rockville, Md., posted annual sales of $2.9 billion and employs 20,000. With the acquisition, the subsidiary will add $1.2 billion a year in revenue and 5,300 employees nationwide.

Analysts said BAE has been able to quietly build the business by purchasing small, lesser-known names in the industry. Its biggest previous acquisition came in 1998 with the $1.4-billion purchase of Texas-based Tracor Inc.

In addition to Sanders, the deal includes the purchase of Lockheed Martin's Fairchild systems in Syosset, N.Y., and its Space & Communications unit in Manassas, Va. Sanders is based in Nashua, N.H.

The businesses make everything from sensors and electronic warfare devices to avionics and radars.

Lockheed Martin said the sale is part of a broader effort to shed eight businesses and reduce almost $12 billion in debt.

The approval by the Treasury Department's committee on foreign investments in the United States did not face much controversy and, as a result, prompted little reaction on Wall Street. The only time the committee prevented a foreign acquisition of a U.S. defense company was in 1989 when President Bush blocked the sale of Mamco Manufacturing Co., a Boeing Co. parts supplier, to a Chinese firm.

In a shortened day of trading in the New York Stock Exchange, Lockheed Martin shares rose 45 cents to $34.35.

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