Comsat Shareholders OK Sale Plan

Shareholders of Comsat Corp. voted overwhelmingly Friday to approve Lockheed Martin Corp.’s proposed purchase of the satellite services company.

Comsat said 39.4 million shares, or 99% of total votes, were cast in favor of the merger and represented more than 74% of Comsat’s approximately 53 million shares outstanding.

The strong support came despite a decline in the value of the deal since it was announced last September and considerable regulatory hurdles that must still be overcome.

Comsat Chief Executive Betty Alewine told shareholders the Lockheed merger was the best way Comsat could respond to the uncertainty of rapid changes in the satellite business. “It will bring new assets to meet ever-growing customer demands for high-speed data, Internet and other networking services,” Alewine said.

The vote, originally set for June, was delayed after Lockheed issued profit warnings that month that caused its stock to plunge, cutting the value of the cash-and-stock deal to $2.2 billion from $2.7 billion.

The acquisition would give Lockheed, also based in Bethesda and the nation’s largest defense contractor, a jump start for its newly created global telecommunications unit.

The deal still requires antitrust approval by the Justice Department and review by the Federal Communications Commission.

In addition, current law prohibits any private-sector company from owning more than 10% of Comsat.

Last month the Senate approved a bill lifting the 1962 provision that dates to when Comsat was established as the U.S. seller of capacity on the multi-nation Intelsat and Inmarsat systems. No similar measure has yet been introduced in the House.

Lockheed Martin has applied to the FCC for status as a “common carrier” that would allow it to proceed with the first portion of the two-step deal and purchase up to 49% of Comsat for $45.50 per share in cash.

But the law would need to be changed for Lockheed Martin to purchase the remainder of Comsat in a 1-for-1 stock swap.

If Lockheed fails to complete its tender offer for 49% of Comsat by Sept. 18, the agreement between the companies would allow either party to back away from the deal.

Lockheed shares closed up 44 cents at $37.75, while Comsat closed down 50 cents at $35.88, both on the New York Stock Exchange.