Lockheed Martin Corp. completed the first half of its acquisition of Comsat Corp. yesterday, completing a tender offer for 49 percent of its Bethesda neighbor just before a noon deadline that would have freed either of the companies to walk away from the $2.5 billion deal.
The completion of the tender offer had been widely expected among officials of the two companies and industry analysts.
The deal was announced almost a year ago -- Sept. 20 -- and was first valued at $2.7 billion.
Defense giant Lockheed, whose stock price has fallen more than 31 percent in that time, targeted Comsat for purchase to become less reliant on the sagging armaments industry and to build its presence in a more dynamic sector -- telecommunications.
"Telecommunications services represents a robust, near-term, high-growth opportunity for our corporation," said Vance Coffman, Lockheed Martin's chairman and chief executive officer.
For Lockheed to take full control of Comsat, Congress will have to pass legislation that allows an outside private-sector company to take over the communications-satellite company.
Limitations on outside ownership were written into the 1962 legislation that created Comsat.
The Senate has approved the necessary changes.
But in the House of Representatives, Commerce Committee Chairman Thomas J. Bliley Jr., a Virginia Republican, has indicated that he believes satellite-reform legislation must be passed before the purchase of Comsat is allowed to go forward.
"Of the challenges, the legislative portion is the most difficult," said William Kidd, an analyst with C. E. Unterberg, Towbin in New York.
Kidd added that Congress may be poised to act on satellite-reform legislation by the end of October, which he said would put the deal on course to be completed by the end of the year.
"I think it would be a real negative if it didn't happen this year, because it would show how tough the resistance really is," said Kidd. "I think it would put a dark cloud on Lockheed's ability to get this deal done."
Kidd said Lockheed and Comsat could draw comfort from the relative ease with which their proposed union moved around regulations last week.
On Wednesday, the Federal Communications Commission granted Lockheed permission to absorb 49 percent of Comsat. But the agency also passed rules that some thought could diminish Lockheed's interest in buying Comsat.
The FCC ended Comsat's exclusive right to provide American companies access to the Intelsat satellite network and limited the surcharge that the company could levy to cover regulatory expenses.
"Our analysis showed that while it will have an impact, it's not one that affects our desire to go forward," Lockheed spokesman Charles P. Manor III said.
The day after the FCC offered its approval, the Department of Justice gave its blessing to the deal.
When asked why this part of the deal was completed so close to the deadline, Manor said: "What you're seeing is the behavior of a very prudent company making sure everything was buttoned down and in compliance with the tender offer. This is a very complicated transaction."
The companies did not make a joint announcement yesterday and have not made any during the run-up to the tender offer. "It was not appropriate to make any sort of joint statements until these sorts of milestones are complete," said a Comsat official who insisted on anonymity.
"We will continue to operate as separate entities until the deal is consummated."
The completed tender offer consists of Lockheed's acceptance of nearly 26 million Comsat shares offered in response to Lockheed's offer to buy up to 49 percent of Comsat's common shares.
Those shares are being bought for $45.50 a share in cash, or $1.2 billion total.
Comsat's stock closed Friday at $36 a share.
A total of nearly 48 million Comsat shares have been tendered to Lockheed.
In the last phase of the transaction, to be completed after Congress takes action, Lockheed will swap one share of its common stock for each remaining Comsat share.