Lockheed in Pounds 6bn Defence Deal

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Lockheed Martin, one the world's biggest defence companies, is buying the bulk of the defence electronics business Loral for $9.1bn (pounds 6bn) in a further rationalisation of the US weapons industry.

Lockheed Martin will keep Loral's defence electronics and systems integration businesses, and spin off the satellite communications operation into a separate company.

The deal is another major consolidation of the shrinking defence business, and will add to pressure among European companies to cut costs through further mergers and cross-border alliances.

Lockheed Martin, itself a merger in 1994 between Lockheed and Martin Marietta, is paying $7bn in cash and taking on $2.1bn in debt for the defence operations.

The satellite business will be renamed Loral Space and Communications, with Lockheed buying 20 per cent of the business for a further $344m. Loral shareholders would get one share of Loral space for every share they now own.

Maryland-based Lockheed Martin makes military aircraft, space systems, missiles and electronics systems. New York-based Loral's products include radar jamming equipment, aircraft voice recorders and air traffic control systems. The combined company will have annual revenues of about $30bn.

Keith Patriquin, an analyst atLoomis Sayles, said the deal confirmed Lockheed Martin's global position in both defence and civilian aerospace. …