L-3 Communications Inc. has signed a definitive agreement to buy Titan Corp. for approximately $2.65 billion in cash and assumed debt.
L-3 Communications Inc. has signed a definitive agreement to buy Titan Corp. for approximately $2.65 billion in cash and assumed debt, the companies announced today. The deal will push the combined firms into the top 10 of Washington Technology's Top 100 list of federal prime contractors.
Under the deal, Titan's shareholders will receive $23.10 in cash for each share of common stock. Titan's shares closed Wednesday at $22.79.
The companies are expected to complete the transaction in the second half of 2005, and possibly by the end of the third quarter on Sept. 30, pending an approval vote by a majority of Titan's shareholders, customary regulatory approvals and the court filing of settlements of outstanding lawsuits.
Based in San Diego, Titan employs roughly 12,000 people, more than 9,000 of whom have U.S. government security clearances. The defense contractor had 2004 revenue of $2 billion and a net loss of $38.4 million. It is No. 12 on Washington Technology's 2005 Top 100 list of federal prime contractors.
L-3 Communications of New York is ranked No. 15 on the list. The company employs 44,200 workers and had 2004 revenue of $6.9 billion, with profit of $381.9 million.
"The acquisition is very strategic for L-3 because Titan is a major provider of intelligence services to the Defense Department and key U.S. intelligence agencies," said Frank Lanza, chairman and chief executive officer of L-3 Communications. Titan also is a major provider of IT and engineering services and products to the U.S. Army, Naval Air Systems Command, Naval Sea Systems Command, Space and Naval Warfare Systems Command, U.S. Air Force Electronics Systems Command, Special Operations Command and U.S. Northern Command.
"Titan will enable L-3 to penetrate new customer areas as well as expand on existing ones," Lanza said, noting that those areas include the National Reconnaissance Office, National Security Agency, U.S. Marine Corps, FBI and defense intelligence agencies.
L-3 specializes in providing intelligence, surveillance and reconnaissance systems, secure communications systems and other high-tech products mainly to the Defense and Homeland Security departments, U.S. intelligence agencies and aerospace prime contractors.
Gene Ray, Titan's chairman, president and chief executive officer said in a statement: "This merger with L-3 will create a company with greater resources and the operational flexibility to offer our customers an even broader spectrum of innovative systems and quality solutions."
Concurrently with the merger agreement, Titan entered into memoranda of understanding to settle securities law class-action and derivative lawsuits pending in both federal and state courts in California and the Delaware Court of Chancery. The settlements will take effect after the merger closes and court approvals have been received.
In February 2004, the Securities and Exchange Commission and the Justice Department started investigating Titan on allegations that its contractors and overseas subsidiaries paid bribes to foreign governments in exchange for business. Titan later agreed to settle with the government by pleading guilty to three felony charges and paying a $28.5 million penalty under the Foreign Corrupt Practice Act.
Lockheed Martin Corp. cancelled its planned $2.2 billion purchase of Titan in June 2004 because of the then-unresolved investigations of Titan by the SEC and Justice.
Subsequently, Titan's shareholders filed a class-action lawsuit last year accusing company executives of concealing the alleged illegal payments to foreign government officials or violating their fiduciary duties by not preventing them.
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