The FCC voted to allow Lockheed to buy 49 percent of Comsat, the satellite company created by the government 37 years ago. Lockheed cannot acquire the rest of its Bethesda neighbor unless there is a change in a federal law that prevents any company from owning more than 50 percent of Comsat.
Analysts said yesterday's approval by the FCC was widely expected. "It's another step," said Philip Wohl, an analyst with S&P; Equity Group.
But, he added, the deal still faces potential difficulty with the Justice Department, which has until the end of today to review it for Comsat.
"These are huge players," he said. "If you combine two of them, that's definitely cause for concern."
"Everyone was expecting FCC approval," said another analyst, who insisted on anonymity. "It's the DOJ everybody is waiting on."
Lockheed, pushing to strengthen its newly created global telecommunications unit, is proposing to purchase 49 percent of Comsat's common stock at $45.50 a share, or $1.3 billion, and assume $455 million in debt. It then would issue one share of its stock for each remaining share of Comsat.
The acquisition faces many obstacles. The Senate approved a bill in July that would change the law restricting one company from owning more than 50 percent of Comsat. But the House has not acted.
This month, Lockheed revealed another possible barrier when it said it had not been able to reach an agreement with Loral Space and Communication Ltd. to sell its 14 percent stake in that company.
Lockheed had agreed to sell that stake to allay antitrust concerns about ownership of shares of two satellite communications companies.
Wohl, the S&P; analyst, said the deal's chances are improving as time goes by. He said he initially gave the transaction a 10 percent chance, when it was announced.Now, he gives it a 40 percent chance.
But, Wohl added, the transaction -- if completed -- will have restrictions that might force other divestitures, making the combination less attractive. "You don't want to shed assets you might need down the road," he said.
If Lockheed's tender offer for 49 percent of the company is not completed by Saturday, either Lockheed or Comsat may terminate the merger agreement. The companies could also amend the merger so that the offer could be completed after that date.
Lockheed shares closed at $35, down $1.50. Comsat's shares fell $1.4375, closing at $27.50.
Pub Date: 9/16/99