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Shares of Titan Sink as Deal Slips Away

June 26, 2004|Peter Pae | Times Staff Writer

Shares of Titan Corp. plunged more than 20% on Friday as the proposed sale of the San Diego-based defense contractor to Lockheed Martin Corp. for $1.66 billion appeared all but dead.

Lockheed, the nation's largest defense contractor, declined to say late Friday whether it was dropping its bid even though Titan had announced it didn't expect to meet Friday's deadline to settle criminal allegations that its consultants had bribed foreign officials.

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, which came to light after Lockheed proposed the acquisition, led the company to reduce its offer from $1.8 billion and twice delay closing the deal.

Barring any last-minute agreement, analysts said they expected Lockheed to make a formal announcement ending the deal as soon as today.

"We do not know Lockheed's intentions," Wil Williams, Titan's spokesman, said Friday. "After today, either company can terminate the deal."

The outcome was dramatic for the once highflying company built on doing lucrative classified information technology work for the government.

Titan shares plunged $3.71, or 20.3%, to $14.53 on the New York Stock Exchange. Lockheed shares lost 14 cents to $51.97, reflecting a consensus that the deal was far more important to Titan than to Lockheed.

Analysts said the purchase would have strengthened Lockheed's information technology business but wouldn't have been essential to the company's growth.

Lockheed had sales of about $31.8 billion last year, compared with sales of $1.77 billion for Titan.

If the Lockheed deal collapses, Titan could still end up being a target for other major defense contractors once it resolves the criminal charges, analysts said.

"Titan is still a fundamentally attractive asset," said Richard Phillips, vice president for the aerospace group at Houlihan Lokey Howard & Zukin. "If they want to they can be targets again."

But Jon B. Kutler, chairman of aerospace investment bank Jefferies Quarterdeck, said he expected Titan officials to "put their heads down, focus on operations and reestablish momentum."

"The worse thing they could do is go from one deal to another with the overhang," Kutler said.

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