L-3 looks to build IT business with Titan acquisition

L-3 Communications Inc. will move Titan Corp.'s headquarters to its own New York hub, and Titan's longtime chief will retire when L-3 completes its acquisition later this year, Frank Lanza, L-3's chairman and chief executive officer, said today during a conference call broadcast via the Internet.

The relocation of Titan's main offices from San Diego to New York will not affect Titan's business, he said. He also added that L-3 would not need all of Titan's resources, but did not specify any areas that would be cut.

Gene Ray, Titan's chairman, president and chief executive officer, will step down from the company, Lanza said. Ray had been planning to retire and Titan started searching for a successor last year.

As part of its strategy, L-3 will continue to make additional small niche acquisitions valued in the $20 million to $30 million range, but plans to focus on growing the company organically, Lanza said. He added that the Titan acquisition will extend L-3's prime contractor position in getting work from the federal government.

Responding to a financial analyst's question, Lanza also said that with the acquisition, L-3 expects to build business in the government information technology services sector.

L-3 announced earlier today that it signed a definitive agreement to buy Titan Corp. for about $2.65 billion in cash and assumed debt after a round of late-night negotiations [see WT story].

L-3 had a 45-day period of exclusivity to review the company's operations and strike a deal, Lanza said. Titan is L-3's largest acquisition to date and will make the company the sixth-largest defense contractor in the United States, he said.

Under the deal, Titan's shareholders will receive $23.10 in cash for each share of common stock. The companies are expected to complete the transaction in the second half of 2005, and possibly by the end of the third quarter, which ends Sept. 30.

Titan employs about 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 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 community and aerospace and defense prime contractors. The company employs 44,200 workers and had 2004 revenue of $6.9 billion with profit of $381.9 million. L-3 Communications is ranked No. 15 on the Top 100 list.

(Posted June 3 at 9:26 a.m. and updated at 2 p.m.)