French-Led Firm to Bid for LTV Unit : Defense: Thomson-CSF reportedly is challenging Lockheed, Martin Marietta for the deal.
A French-controlled defense electronics firm today will launch an effort to outbid a Lockheed-Martin Marietta team for LTV Corp.’s aerospace and defense subsidiary, sources close to the effort said Tuesday.
Insiders say Thomson-CSF Inc.--along with Carlyle Group, a Washington-based investment firm--today will offer $400 million for the unit, $45 million more than the bid by Lockheed and Martin Marietta.
Such an offer is expected to stir additional acrimony among lawmakers and union officials who believe that foreign firms should be prevented from acquiring major U.S. defense contractors. Similar criticism has been directed at McDonnell Douglas’ proposed sale of a big stake in its commercial aircraft operations to Taiwanese interests.
The expected offer would also start a bidding war for the LTV unit, which--despite the financial troubles of its parent--is involved in several key defense programs and holds some advanced technologies. Lockheed will not comment on whether it plans to sweeten its bid until after any competing offer is officially submitted, a spokesman said.
Thomson-CSF and Carlyle plan to make their joint offer at a U.S. Bankruptcy Court hearing today in New York, said a source close to the proposed deal. Dallas-based LTV, mired in a Chapter 11 reorganization since 1986, plans to sell its aerospace and missiles subsidiary to help pay off its debts.
Calabasas-based Lockheed and Bethesda, Md.-based Martin Marietta on Feb. 26 announced a definitive agreement to acquire the LTV subsidiary for $355 million. The two firms would hold the LTV operation through a newly created firm, Vought Corp.
The government of France owns Thomson, which owns 60% of Arlington, Va.-based Thomson-CSF. The other 40% is publicly traded. Thomson-CSF, which has previously bid $230 million for the LTV missiles division alone, would not confirm whether it is planning to make a new offer.
The bankruptcy judge--not LTV--will determine which buyout team will obtain LTV’s subsidiary. The judge and LTV are obligated to accept the best deal offered, said Jerry Dalton, an LTV spokesman. However, Dalton said, the judge is likely to ask LTV for an evaluation of any competing bids. No timetable has been set for the judge’s decision.
“It’s not just a question of money value, we also have to examine the terms and conditions of an offer,” Dalton said. “We must determine whether there are terms and conditions troubling to us.”
The expected Thomson-CSF bid, because it significantly tops previous offers from U.S.-owned firms, is likely to prompt questions about the motives of the French-controlled firm.
“LTV is a real aerospace company,” the source familiar with the expected bid said. “Until a few years ago, it built aircraft for Navy carriers. It builds portions of the B-2 bomber. It has missiles. There is a lot of technology there.
“Either Thomson wants U.S. technology that it could not get any other way and that it is not entitled to, or it wants to export LTV products to countries that American firms are not allowed to,” the source said.
Lockheed would oppose a Thomson-CSF buyout on principle, said Scott Hallman, a Lockheed spokesman.
“We think it’s important to retain American-developed defense technologies in this country,” Hallman said. “After all, the taxpayers did pay for that (technology) development.”
Also troubled by the possibility of a Thomson-CSF buyout are at least 40 members of the U.S. Senate. In a March 10 letter, 40 senators asked President Bush to consider blocking an LTV deal should Thomson-CSF submit a winning bid. The federal government should “consider the economic ramifications and the national security impact resulting from this type of sale,” the senators said in their letter.
