NEW YORK -- Martin Marietta Corp. and an investment group led by Loral Corp. will square off in federal bankruptcy court here today for control of LTV Corp.'s missile and aircraft operations.
The showdown is the first of a two-part legal feud involving some of the nation's top defense contractors. In the balance hangs a company that holds key contracts for emerging missile and aircraft technology. Those contracts are vital to defense companies hoping to ensure their market positions amid the austerity of the post-Cold War era of military cutbacks.
Industry analysts say the legal fight is too close to call. The LTV assets would fit well with either bidder, and both are known for solid acquisition
and management strategies.
On one side of the courtroom is Bethesda, Md.-based Martin Marietta, the suitor preferred by LTV management. Although its bid, $396 million in cash and $44 million in preferred stock, is lower than Loral's, Martin Marietta has an agreement with LTV and its creditors, who say they consider the offer more certain and to have fewer contingencies than Loral's.
LTV's ties with Martin Marietta run deep. Martin Marietta's chairman, Norman R. Augustine, was vice president of LTV's missile division in the early 1970s before becoming assistant secretary of the Army.
Martin Marietta originally bid for the LTV operations in February, proposing a $385 million venture with Lockheed Corp. to run them as a sepa
rate company. That proposal lost to a higher bid from Thomson-CSF Inc. in a bankruptcy court auction this spring.
On the other side of the courtroom is the Loral group, led by Loral Chairman Bernard L. Schwartz, the deal maker of the defense industry.
Since 1985, Mr. Schwartz has bolstered Loral's revenue through several acquisitions. Loral's partners include the Carlyle Group, a Washington investment bank led by former Defense Secretary Frank C. Carlucci, and Northrop Corp.
Loral made an 11th-hour bid for LTV after the Thomson proposal hit obstacles in Congress. Lawmakers objected to the acquisition of a big U.S. defense contractor by Thomson, which is controlled by the French government.
In a few weeks, Loral has rekindled the bidding war begun by Thomson. Its latest offer, made Tuesday, is $450 million in cash and $25 million in preferred stock.
In response, Martin Marietta said yesterday that it would not increase its $440 million bid for the missile and aircraft divisions of LTV Corp. despite a new, higher offer from rival bidder Loral Corp.
The company instead dismissed the Loral bid, which surpasses Martin Marietta's by $35 million, and said it expects to close on a deal with LTV within two weeks.
"There is a very critical difference here -- ours is not a bid, it's more
than that. It's a contract," said company spokesman Phil Giaramita. "Loral seems to be providing its offer via press release. We have a formal submission in the court, which creditors and LTV has examined and agreed to support.
Mr. Giaramita also said there was more to consider in Martin Marietta's agreement than money.
"If the judge approves our contract, we're in position to close within a week or two," he said. "That would settle the situation for 14,000 employees in Texas and Arkansas, and LTV's court situation would be significantly improved."
Tuesday, the Loral group began the second part of the legal feud. Carlyle sued Martin Marietta, claiming it interfered with Thomson's earlier offer, in which Carlyle was a partner. Carlyle is seeking $150 million in compensatory damages and unspecified punitive damages.