Takeover Rumors Send Lockheed Stock Up Sharply
Prompted by speculation that Lockheed is the target of a takeover attempt, the aerospace company’s shares shot up $6.375 Wednesday in New York Stock Exchange trading to close at $52.375.
Lockheed officials, citing a policy established when such takeover rumors last bounced the company’s share prices around in November, said they would have no comment on the new activity.
Aerospace analysts said Wall Street rumors involved a possible takeover run on Lockheed by Ford Motor, Chrysler or General Electric. All three companies declined to comment.
Analysts David J. Smith of Alex Brown & Sons and Paul Nisbet of Prudential Bache Securities both discounted the rumors involving GE and Chrysler. But they were not as ready to play down the possibility of a Ford move on Lockheed.
Ford was sitting on $8.5 billion in cash and securities at the close of 1986 and already has considerable defense industry participation in Ford Aerospace & Communications, a producer of missiles and satellites.
Ford was a bidder for Hughes Aircraft a few years ago and even submitted the highest initial bid for the firm. It was later outbid by General Motors.
In the past year, Lockheed’s stock has traded as high as $63.50 and as low as $39 per share. About 70% of the company’s stock is held by institutions, the highest proportion of institutional ownership in the aerospace industry, Nisbet said. “That does make them vulnerable to a takeover, because they can’t get the institutions to agree to the kind of bylaw changes they need to ward off a takeover,” he said.
Smith termed the speculation in the stock “a semi-annual event” and questioned whether Lockheed’s stock should outperform other relatively low-priced aerospace stocks.
Smith said Lockheed’s stock price is far above its book value of $29 per share and that it has $1.2 billion of debt. In addition, he said Lockheed’s acquisition of Sanders Associates, a New England defense electronics contractor, is not going well.
But analysts said that if Lockheed goes into play as a takeover candidate, it could fetch up to $65 per share, or $4.3 billion.
Last November, during the last surge of takeover speculation, Lockheed’s stock rose $10.50 in two days, reaching $55.25.
Lockheed at the time issued a statement saying it knew of no developments that could have accounted for the rise and said management believed it was in the company’s best interests to remain independent.
Lockheed wasn’t the only aerospace stock that shot up Wednesday. Wednesday’s gainers included TRW, up $2;, General Dynamics, up $2; McDonnell Douglas, up $2.125; Boeing, up $1.50, and Litton Industries, up $1.375. “These aerospace stocks have gotten so cheap that the slightest rumor focuses people on them,” Smith said.
