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Lockheed, Titan Deal May Be Scrapped

The smaller firm doesn't expect to resolve a bribe probe before today's acquisition deadline.

June 25, 2004|Annette Haddad | Times Staff Writer

Lockheed Martin Corp.'s plan to buy San Diego-based Titan Corp. for $1.66 billion was on the verge of collapse late Thursday after the defense giant refused to extend its deadline for Titan to resolve a federal bribery probe.

Lockheed had made closing the deal contingent upon Titan's reaching a plea agreement with the U.S. Department of Justice by today.

Titan, an information technology company that supplies the Pentagon with translators and communications equipment, issued a statement late Thursday saying it didn't expect to meet the deadline and that Lockheed refused to grant the company any more time.

Lockheed stopped short of saying the deal was dead but indicated that could be the case.

"We've extended the deadline for Titan twice previously," Lockheed spokesman Jeff Adams said Thursday. "Titan asked again and we declined to do so. We're not under any obligation to amend the terms again.

"Our position is the merger agreement is still in place and the June 25 deadline is still in place."

Titan officials, meanwhile, had no further comment.

The Justice Department has been investigating allegations that Titan consultants made unlawful payments to government officials in Asia, Saudi Arabia and the African nation of Benin in exchange for business.

The investigation has delayed the acquisition twice since the proposed deal was first announced in September.

Under the terms of the proposal, Lockheed can walk away from the deal if Titan doesn't finalize a plea agreement by today.

Federal officials have declined to comment on the probe, or on whether there could be charges or a settlement. Earlier this month, Titan disclosed that it was informed by the Securities and Exchange Commission that the agency was reviewing the bribery allegations and might recommend civil penalties against the company.

Two weeks ago, Titan shareholders approved the sale of the company to Lockheed, the nation's largest defense contractor. The Bethesda, Md.-based company wants to acquire Titan because of its large pool of employees with government clearances to work on classified programs, a growth area within the industry.

Lockheed initially offered $1.8 billion, or $22 a share, in cash and stock for Titan. In April, Titan agreed to a lower price of $1.66 billion, or $20 a share, in cash, citing the Justice Department probe into whether Titan violated the Foreign Corrupt Practices Act.

In addition to the bribery allegations, Titan is locked in a billing dispute with the U.S. Army related to translation work in Iraq. At least one Titan employee has been linked to abuse of Iraqi prisoners at Abu Ghraib prison.

Trading in shares of Titan and Lockheed was halted a few minutes before the market closed.

In New York Stock Exchange trading Thursday, Titan shares lost $1.08 to $18.24. Lockheed gained 30 cents to $52.11, also on the NYSE.

Earlier in the day, Wachovia Securities lowered its rating on Titan shares to "underperform" from "market perform," saying that it was becoming more likely that Lockheed would withdraw from the deal.

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