Loral Agrees to Buy Ford Aerospace for $715 Million

Loral Corp., a New York-based defense-electronics company, said Friday that it has signed a definitive agreement to buy Newport Beach-based Ford Aerospace Corp. for $715 million in cash.

The purchase price is lower than industry analysts expected when Ford Motor Co. put the defense and communications subsidiary up for sale in January. But industry sources said that Loral’s actual cost could be nearly $900 million if debt and other liabilities are included.

Ford announced July 23 that it had selected Loral as the winning bidder for its Ford Aerospace unit. Loral, in a joint venture with Shearson Lehman Hutton Inc., beat out competing offers from groups led by Hughes Aircraft Co. and Westinghouse Electric Corp.

The deal, which is subject to government approval, is expected to close within three months.

Bernard L. Schwartz, Loral’s chairman and chief executive, said as part of the deal, Loral will assume $20 million in short-term debt and commit about $160 million in employee-benefit obligations. But he said those liabilities will be balanced out by other assets, which include an over-funded pension plan for Ford Aerospace’s 17,000 employees.

Industry analysts said that non-cash obligations push Loral’s cost for Ford Aerospace to at least $895 million.

Ford reportedly had sought cash bids of $1.2 billion when it put the defense unit up for sale in January. But the bids came in much lower as prospects for the defense industry grew bleaker with the melting of Cold War tensions.

Ford said the deal was not subject to any financing conditions. Loral and Shearson Lehman Hutton will contribute $150 million each and borrow the remaining amount from a number of banks.

Schwartz also said that Loral has no plans to divest any part of Ford Aerospace. There has been considerable speculation among Wall Street analysts, industry observers and Ford Aerospace insiders that Loral would probably sell off pieces of the company.

He said that Loral plans to keep Ford’s money-losing Aeronutronic division in Newport Beach, which could return to profitability this year, he predicted. Additionally, he said, the company has signed an eight-year sublease with Ford Motor for the 99-acre property where Aeronutronic is located. The property is owned by the Irvine Co.

But Phil Friedman, a defense-industry analyst at PaineWebber in New York, said the signing of a sublease is no guarantee that Loral will not divest the Aeronutronic division.

“I believe there are assets within Ford Aerospace that they will divest,” Friedman, said, including its Virginia-based BDM International Inc. consulting company and a satellite-communications facility in Palo Alto.