GE to Swap Preferred Stock for Lockheed Martin Units
Lockheed Martin Corp. said Monday that it will turn over some businesses to General Electric Co. in a $2.8-billion deal that will enable Lockheed to retire 29 million shares of preferred stock GE has owned since it sold its aerospace unit to the company in 1993.
GE will acquire Lockheed Martin’s factory on the Middle River in Baltimore, which makes parts for GE and other jet engine manufacturers; Access Graphics, a computer distribution unit in Boulder, Colo.; and Lockheed’s stake in the Globalstar telecommunications network.
With the sale, nearly all of the Middle River facility’s 1,500 workers will become GE employees. The remainder will stay with Lockheed at a unit that makes vertical launch systems for the Navy. Lockheed will continue to own the plant, which has a rich history dating back to its opening in 1929 and its manufacture of B-26 bombers during World War II. GE will lease the space it needs, Lockheed spokesman Charles Manor said.
For GE, the transaction represents a windfall on its original investment. GE sold its aerospace business in 1993 to Bethesda, Md.-based Lockheed for $3 billion, which included convertible preferred stock, then valued at $1 billion. As part of Monday’s transaction, GE will take a note back from Lockheed in the amount of $1.5 billion, representing the difference between the $1.3 billion the businesses are worth and the value of the stock, spokesman Bruce Bunch said. All told, GE expects to record a gain of $1 billion on the deal.
The deal will give Lockheed Martin 29 million fewer shares outstanding and will relieve it of a significant investor as it prepares to consummate its $11-billion acquisition of Northrop Grumman Corp. That deal is pending antitrust review, but analysts expect it to close in the first quarter if Lockheed agrees to divest some overlapping businesses in the electronic countermeasures area.
“The transaction is a positive step for both companies,” Lockheed Martin Vice Chairman and Chief Executive Vance D. Coffman said in a statement. “The transfer of businesses to GE advances Lockheed Martin’s ongoing portfolio-shaping activities and accomplishes a significant reduction in outstanding common shares.”
In New York Stock Exchange trading, Lockheed Martin shares soared $4.06 to close at $99.13, and GE shares rose $2.25 to close at $67.13.
Roger R. Threlfall, an analyst with J.P. Morgan & Co., said the Lockheed divestitures “get them away from some of the non-core operations. It gives them a little more focus.”
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* PLANES DISCONTINUED: Boeing will shut down the MD-80 and MD-90 lines in 1999. A1
