Price Cut for Lockheed’s Titan Deal

Lockheed Martin Corp. and Titan Corp. said Wednesday that they had agreed to cut by 9%, to $1.66 billion, the price the defense giant would pay to acquire the San Diego-based military technology provider. The companies also delayed the purchase for the second time in two months to allow Titan to resolve a criminal probe.

Under the revised agreement, Titan investors will get $20 a share in cash, down from $22 in cash and stock. Shares of Lockheed rose 44 cents to $47.76 on the New York Stock Exchange. Titan fell 31 cents to $19.60.

The revised deal is contingent on a resolution of a federal investigation into whether Titan consultants bribed foreign officials. Lockheed discovered the possible payments in February and told U.S. officials, raising concerns about whether the purchase would be derailed.

Lockheed wants Titan to help expand its computer-services business and trim its reliance on military-aircraft sales.

Cutting the price will please Lockheed shareholders, and better reflect the current value of Titan shares, which had dropped 8.7% since the companies disclosed the suspicious payments on Feb. 13, said Stephens Inc. analyst Timothy Quillin.

The all-cash purchase will boost Lockheed’s per-share earnings more than the original cash-and-stock terms, UBS analyst David Strauss wrote in a note to clients. Under the new terms, Titan would add about 8 cents to 10 cents a share to Lockheed’s annual earnings, compared with 3 cents to 5 cents under the original terms, Strauss wrote.

Titan makes military radios and also has more than 7,000 employees authorized to do classified work, including installation of computer networks, for U.S. intelligence agencies.

The suspicious payments, discovered by Lockheed while reviewing Titan’s books, involve radio sales by Titan’s international operations, which made up 2% of the firm’s 2003 sales. The Justice Department is investigating payments made by Titan consultants in Asia, Saudi Arabia and the African nation of Benin. If the payments were illegal, Titan or its workers could face criminal and civil penalties and limitations on its exports.

Titan’s shareholders are now set to vote on the sale on June 7.