French Firm Drops Its Bid for LTV Missile Unit : Defense: But Thomson-CSF may make another offer that addresses U.S. officials’ security concerns.

French electronics giant Thomson-CSF has dropped a controversial bid for the missile division of LTV Corp., a spokesman for the Dallas-based defense contractor said Monday.

It may come up with a new bid more palatable to U.S. officials, however.

Thomson-CSF told the government Committee on Foreign Investment, which appeared to be opposed to the proposed takeover, that it will withdraw its $300-million offer.

The committee, made up of representatives of the departments of Treasury, Defense, State, Commerce, Justice and three other federal agencies, had until Monday to make a recommendation to President Bush. The French government owns 58% of Thomson-CSF.

Spokesmen for Thomson-CSF and the Treasury Department, which chairs the Committee on Foreign Investment, declined comment Monday.

“What happens next, we don’t know for sure,” LTV spokesman Jerry Dalton said.

Thomson-CSF is seeking to restructure the offer to make it more acceptable to U.S. officials. It would do so by having a big U.S. defense contractor take a controlling interest in LTV’s missile business, leaving the French company as a passive investor, government and industry sources say.

In April, a federal bankruptcy judge approved a Thomson-CSF-led bid of $400 million for LTV’s aircraft and missile divisions. The group, which included Hughes Aircraft Co. and the Washington investment firm Carlyle Group, outbid a consortium of the U.S. defense contractors Martin Marietta Corp. and Lockheed Corp.

Thomson-CSF’s bid has raised strong opposition in Congress, where lawmakers fear that U.S. technology could be diverted to hostile elements abroad. Last Thursday, the Senate voted 93-4 to adopt a resolution opposing the proposed sale on national security grounds.

Defense intelligence analysts recently concluded that American high-tech items could end up in the wrong hands if the sale is allowed.

LTV is involved in several Pentagon and NASA projects, including the Multiple Launch Rocket System, the Army Tactical Missile System, the space station and the space shuttle.

The U.S. Customs Service has been investigating whether Thomson-CSF violated export laws in a 1985 sale of lasers to Iraq.

The lasers involved in the sale were attached to Iraqi Mirage jets and could be used to track targets on the ground, according to sources inside and outside the government.

A spokesman for Thomson-CSF denied that the laser sale was illegal.

Under Thomson-CSF’s original proposal, the French company and Hughes Aircraft, as a 15% minority partner, would have acquired LTV’s missile division for $280 million. The Carlyle Group, headed by former Defense Secretary Frank Carlucci, would have acquired LTV’s aircraft division for $90 million in cash and $30 million in preferred stock.