Newspaper article THE JOURNAL RECORD

Lockheed, Martin Marietta Plan Merger

Newspaper article THE JOURNAL RECORD

Lockheed, Martin Marietta Plan Merger

Article excerpt

NEW YORK _ It was Easter weekend and Martin Marietta Chairman Norm Augustine was being outbid for Grumman Corp. when his counterpart at Lockheed Corp. telephoned.

With Northrop Corp. looking determined to buy Grumman out from under Martin Marietta, Dan Tellep wanted to know whether Augustine would be interested in a combination of the country's No. 2 and No. 3 defense contractors.

The occasional tennis partners started negotiating a merger and on Tuesday they announced a stock swap valued at more than $10 billion to form Lockheed Martin Corp.

Martin Marietta's eagerness to negotiate such a big deal just as its buyout of rival Grumman was collapsing underscores the urgency in the defense business to find new partners as the Pentagon spreads around less money.

"It's a little like a high school dance," Augustine said Tuesday. "You wait against the wall and nobody wants to be the first on the dance floor, but you don't want to be the last one on the floor either."

These two partners would create the biggest defense contractor in the country, with a combined $11.3 billion in Pentagon contracts last year, far ahead of McDonnell Douglas, which took $7.5 billion of the government's weapons spending.

Lockheed is perhaps best known as the builder of the Stealth fighter, while Martin Marietta has built its business as the maker of the country's biggest rockets.

Tellep, 62, is to be chairman and chief executive of the new company and Augustine, 59, will be president. Tellep said Tuesday he would retire at age 65 or earlier, allowing Augustine to step up to the top job.

Lockheed Martin would be headquartered at Martin Marietta's home base in Bethesda, Md., employ 170,000 and have annual revenues of $23 billion.

Executives of both companies said there would be job losses initially, at least in headquarters staff and other support positions. Augustine and Tellep both said, however, that without mergers in the defense industry there would be more job losses and that the combined company expects to increase employment in the long run. …

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