TRW and ICO Plan to Form Satellite Venture

TRW and ICO Global Communications will join forces on a satellite network to provide wireless communications services, ending a long legal battle between the two companies.

The companies announced Wednesday that TRW will invest about $50 million in cash in London-based ICO in exchange for about 7% of ICO’s outstanding stock, which has a face value of $150 million. ICO will also pay TRW $25 million next month and another $25 million by June 1999 to settle a patent infringement lawsuit filed by TRW last year. All other litigation between the firms will be dropped.

With the deal, TRW’s space and defense group in Redondo Beach is giving up plans for its own 12-satellite Odyssey network. The company has been trying to raise money and find partners for two years, but support has been hard to find in the face of competition from Iridium and Globalstar, two rival systems announced well in advance of Odyssey.

Instead, TRW will throw its support behind ICO’s system and gain U.S. distribution rights for ICO’s products and services. The deal, expected to close Jan. 7, will make Cleveland-based TRW one of ICO’s biggest shareholders.

“I don’t see this as throwing in the towel on Odyssey,” said Peter Stenzel, director of marketing and business development for TRW Odyssey Services Organization. Much of the technology that ICO uses--including the unusual decision to use satellites in medium Earth orbit--is patented by TRW, and the company’s engineers in Redondo Beach and Fairfax, Va., are likely to play a significant role in designing the second-generation of ICO’s system, he said.

“We had a patented system design that was generally recognized as the best architecture for providing high quality service at low cost, and ICO had an investor base which now numbers 57 companies,” Stenzel said. “We are merging the technology and regulatory and patent strengths of Odyssey with the financial and distribution strengths of ICO.”

The deal was good news for Hughes Electronics, whose Space and Communications division in El Segundo has a $2-billion contract to build ICO’s 12 satellites and launch them about 6,000 miles above sea level. Hughes spokesman Donald O’Neal said his company never doubted that the legal dispute would be resolved and that ICO’s network would go forward.

Investors apparently did not reward TRW for the deal, bidding its shares down 38 cents Wednesday to close at $54.63 on the New York Stock Exchange. Meanwhile, shares in General Motors Class H stock, which reflects Hughes’ performance, rose $2.25 to $66.94 on the Big Board. ICO Global Communications is privately held.

Stenzel blamed TRW’s late start for its inability to attract many investors for Odyssey. By the time TRW announced the project in October 1995, ICO and Iridium had already completed their first rounds of fund raising. TRW and its main partner, Montreal-based Teleglobe, missed a self-imposed deadline to raise $800 million earlier this year.

Bloomberg News was used in compiling this report.