Lockheed, Titan still working on a deal

Defense IT giants Lockheed Martin Corp. and Titan Corp. are working to complete a merger that has been delayed by allegations that Titan consultants made improper payments to officials abroad in return for contracts, company officials said.

Lockheed Martin announced in September that it was acquiring Titan for $2.4 billion. In February, allegations surfaced that Titan consultants or subsidiaries made improper payments or provisions of "items of value" to foreign officials to win contracts. At that time, San Diego-based Titan also said it was reviewing whether payments to its consultants were accurately declared on its books and records.

If true, the allegations could constitute violations of the Foreign Corrupt Practices Act.

Titan's international operations generated about 2 percent of its total revenue of around $1.8 billion in 2003, according to the company's March 5 statement.

Titan's shareholders, who must approve the sale to Lockheed Martin, were to vote on March 16. But yesterday they postponed the vote until April 12 to give both Titan and Lockheed Martin more time to complete their internal reviews and to allow more time for investigations by the Securities and Exchange Commission and the Justice Department.

"Our reviews of the payments involving the international consultants are ongoing, and we both agreed to postpone the meeting to review [them]," said Tom Jurkowsky, Lockheed Martin's vice president of media relations.

If the acquisition is not completed between March 31 and April 20, either company may terminate the merger agreement, provided that the party seeking to end the agreement is not in material breach of its obligations under the terms of the merger agreement. All other stipulations of the agreement remain unchanged.

"We are working diligently to close the merger as planned on April 12," said Wil Williams, Titan's vice president of corporate communications.

One analyst said that the investigations are a minor delay and won't derail the deal.

"Both parties appear anxious to consolidate the deal as can be seen by their agreement to delay it to allow time to complete the investigation that is ongoing," said Paul Nesbit, a defense industry analyst at JSA Research, Inc. in Newport, R.I. "Even if there was another delay, it would not likely jeopardize the deal."

Nesbit said that allegations of improper payments by companies seeking contracts are not out of the ordinary when it comes to dealing with foreign countries.

"There's a fine line between what is a valid finder's fee and a bribe, and overseas countries don't have a fine line to distinguish between the two like we do," he said.