By KATHERINE PETERSEN
Two corporations with key facilities in Sunnyvale announced a $9.1 billion agreement Friday that will combine their businesses and spin off a new company.
Lockheed Martin and Loral corporations said their defense electronics and system integration businesses will be merged to enhance opportunities for competitiveness and growth.
Under terms of the agreement, Lockheed will acquire several Loral units, including Loral Space and Range Systems in Sunnyvale, which employs 1,600 people.
The agreement "could have serious impacts on local employment because the two corporations employ more than 15,000 people at 11 sites in and around the Silicon Valley," according to a Jan. 9 report in San Jose's daily newspaper. "While executives denied layoffs are in the offing, some industry analysts estimate the companies could shed up to 4 percent of their combined work force worldwide."
"This merger is about growth and the synergies of the companies, not layoffs," said Joanne Hvala, Loral's vice president of corporate communications, of the largest defense industry deal since Lockheed united with Martin-Marietta in 1994.
Officials said the transaction already has been approved by the boards of directors of Lockheed and Loral, which are headquartered in Bethesda, Md., and New York City, respectively.
Lockheed Martin will buy Loral's defense business by assuming $2.1 billion in debt and by paying Loral shareholders $7 billion, or $38 per share, in a tender offer.
At the same time, the announcement said, Loral stockholders will get shares in a new public company called Loral Space and Communications. Loral Space and Communications will own Loral's current satellite and telecommunications interests, including Space Systems/Loral in Sunnyvale and Globalstar, a joint venture between Loral and Qualcomm of San Diego. These interests currently employ 2,300 people.
Lockheed Martin will invest another $344 million in Loral, a rate of about $7.50 per share, to obtain a 20 percent equity position in Loral Space. Loral chairman and CEO Bernard Schwartz will become vice chairman of Lockheed Martin and join its board of directors.
When the transaction is complete, Lockheed Martin's combined sales are expected to reach about $30 billion.
Bay City News Service contributed to this report.
This article appeared in the Sunnyvale Sun, January 10, 1996
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