Loral Finalizes Deal for Ford Aerospace
Ford Aerospace Corp. on Wednesday officially got a new owner and a new name--Loral Aerospace--when Loral Corp. completed its $715-million acquisition of one of Orange County’s largest aerospace contractors.
“The marriage of Loral and Ford Aerospace joins complementary programs, technologies, markets and customers and brings new dimensions to our business,” said Bernard L. Schwartz, chairman and chief executive of Loral Corp., a New York-based defense electronics concern.
Ford Aerospace, which employs 2,600 people in Newport Beach, will be absorbed by Loral Aerospace Holdings Inc., a joint venture of Loral and Shearson Lehman Hutton Inc. Ford Aerospace reported $1.9 billion in sales last year and employs 17,000 people worldwide.
Loral and Shearson each contributed $147.5 million of equity to the acquisition, with the balance financed by bank borrowings. Loral will operate the company and owns 51.5%, with an option to boost its stake to 70%. Prior to Wednesday’s closing, Loral has agreed to sell parts of Ford Aerospace for $312 million, slightly more than the combined cash contributions that Loral and Shearson are putting up for venture.
The company Loral is taking control of will look different from the one it agreed to acquire in July. On Wednesday, Loral closed a deal to sell Ford Aerospace’s defense consulting business, Virginia-based BDM International, to the Carlyle Group for $130 million in cash and notes.
And Loral announced Monday that it has agreed to sell a 49% equity interest in Ford Aerospace’s Space Systems Division in Palo Alto to three European partners for $182 million.
“Schwartz will end up with a valuable property for free before it’s all over,” said Michael Beltramo, a Los Angeles defense consultant. “He’s looking smarter and smarter every day.”
As part of the buyout, Ford Motor Co. will keep about $100 million of Ford Aerospace’s overfunded pension fund. The pension transaction, which caused concern among many Ford Aerospace retirees, will leave the pension fund with a “substantial” surplus, said Mark Miller, Ford Motor spokesman.
Earl Nichols, a spokesman for the Defense Logistics Agency, said the administrative agency will review the transaction to determine whether the Department of Defense has any claim on the overfunded amount. Loral officials say they do not believe the Pentagon has any claim.
Analysts say the purchase of Ford Aerospace is a financial coup for Loral and the sale of the units will help Loral reduce the debt incurred in the acquisition. With Ford Aerospace, Loral will have annual sales of about $3 billion.
Loral reported earnings on Wednesday of $20.9 million on revenue of $357 million for the second quarter ended Sept. 30.
Loral spokeswoman Elizabeth Allen said Loral expects additional bookings of $100 million during 1991 as a result of the Middle East crisis. Loral provides electronics gear for the F-15 fighters that Congress is considering selling to Saudi Arabia.
