Loral’s Acquisition Major Victory for CEO

For Loral Corp. Chairman and Chief Executive Bernard L. Schwartz, Lockheed Martin Corp.’s planned acquisition of his company’s defense electronics operations marks a triumph and a new beginning.

Twenty-three years ago, Schwartz took over a tiny, failing electronics company in Brooklyn, N.Y. Through merger after merger, Schwartz turned it into Loral, one of the world’s largest defense companies that now is poised to fetch one of the highest prices ever paid for a defense company operation.

The deal is also a personal windfall. Schwartz owns at least 1.8 million shares of Loral, according to a proxy statement, worth more than $81 million.

After the merger, he will run Loral Space & Communications, which will be spun off as a separate company, and be vice chairman of Lockheed Martin. The 70-year-old former accountant will also try to repeat his success with Globalstar Telecommunications Ltd., a fledgling satellite operator he now chairs.

“After 23 years of building Loral, I feel a great satisfaction,” Schwartz said at a news conference Monday.

An unconventional defense industry outsider--he’s a liberal Democrat and opposed the Vietnam War--Schwartz bought defense businesses, more than 80 altogether, when nobody else wanted them.

“From being an outsider and not part of the old-boy network, he has emerged as being the smartest in the industry,” said Lior Bregman, an Oppenheimer & Co. analyst. “It’s a major intellectual victory, as well as a financial victory.”

Even as Loral grew into a defense industry giant, it retained the singular stamp of Schwartz’s personality. When journalists and Wall Street analysts called with questions about Loral, Schwartz himself usually called back to answer.

In 1971, when Schwartz took the reins, Loral had been in business for 33 years but remained just a small subcontractor on the F-15 fighter aircraft. During Schwartz’s 23 years, annual sales have grown, on average, 26% each year, to $6 billion.

The end of the Cold War scared some companies out of the defense industry, but Loral was buying, positioning itself for the new high-tech military.

In a 1990 Times interview, Schwartz said: “I believe there will be reallocation of defense resources toward mobile, fast-response and high-technology capability. The total amount of defense may be the same, but there will be new priorities to reflect the new realities.”

Bloomberg Business News contributed to this report.