San Diego’s Titan May Be Bought by L-3
San Diego defense contractor Titan Corp. is negotiating a possible acquisition by L-3 Communications Holdings Inc., sources familiar with the situation said Thursday, sending Titan’s shares up 7.6%.
The sources said the talks were fluid and there was no assurance of an acquisition of Titan, which has a market capitalization of $1.9 billion.
News of the possible deal sent shares of Titan, which sells information and communication systems primarily to the U.S. military, to their highest level in more than 15 months.
The discussions with New York-based L-3 come 11 months after the collapse of Titan’s deal to be acquired by defense giant Lockheed Martin Corp. That deal was scrapped over a foreign bribery probe of Titan, which has since been settled.
The Wall Street Journal, which first reported news of the talks, said Titan had been approached by several potential suitors in recent months.
The discussions with L-3, which has grown through dozens of defense acquisitions, have been the most extensive, according to the Journal. A report in the New York Times said a deal could come next week.
“I would be surprised if everyone in the defense industry hadn’t taken at least a look at Titan,” said Steve Grundman, director of aerospace and defense consulting at CRA International, a Boston-based consulting firm.
Shares of Titan rose $1.52 to $21.55 on the New York Stock Exchange, their highest since February 2004. The shares had jumped 6.6% on Wednesday after Titan canceled two investor presentations this week, which sparked market rumors that it might be in merger talks.
Shares of L-3 fell 46 cents Thursday to $68.13 on the NYSE on concerns that it may have to pay a high premium to win Titan, analysts said. L-3 told analysts and investors during its first-quarter conference call this year that it was weighing possible acquisitions of $1 billion to $3 billion, according to a Prudential Equity Group research report.
Peter Cohen, Titan’s lead outside director, discussed the possibility of a deal with L-3 Chief Executive Frank Lanza, according to the Wall Street Journal. Cohen has told investors that the company would consider bids only equal to Lockheed’s best offer of $22 a share, the newspaper said.
Lockheed initially offered to buy Titan for $22 a share in late 2003, later dropping its offer to $20 a share, or about $1.66 billion overall, as the bribery scandal erupted at Titan.
Spokesmen for Titan and L-3 declined to comment.
