Among the things L-3 Communications acquired in its $2.6 billion purchase of San Diego’s Titan Corp. , on top of Titan’s order book, its contracts to provide various goods and services to the Pentagon, and roughly 5,000 employees with high-level security clearances , is an intangible.
In the eyes of Frank Lanza, New York-based L-3’s chairman and chief executive, that intangible is worth keeping hold of.
“We intend to maintain the Titan culture,” Lanza said last week in an interview with the
San Diego Business Journal.
“We don’t want to lose that culture.”
L-3 announced July 29 that it had closed its deal to buy Titan.
Titan had been a publicly traded company on the New York Stock Exchange with its main office on Torrey Pines Mesa. Now its headquarters are at L-3’s office in New York City. Lanza, 73, spoke of “redundancy” at the corporate level and indicated that L-3 may not need help in corporate functions such as communications, legal, human resources and finance. Some corporate people are on three-month retainers, he said.
At the sector level, though, it’s another story. L-3 plans to keep Titan’s business sectors largely intact and keep sector management in place, Lanza said.
“You’re going to see little or no layoffs at the sector level,” he said.
Titan has 12,000 employees worldwide.
Gene Ray, Titan’s chairman and chief executive, said in a brief interview last week that he intends to work as a consultant to L-3. He would not comment on other personal plans.
Ray, 67, said the merger is a win for Titan employees as the company will “continue to grow.” Shareholders and customers are other winners, Ray said.
Indeed, Lanza said Titan’s local work force , now at about 1,000 , could grow by as much as 20 percent.
L-3 will release specifics on how the former Titan Corp. will fit into L-3’s organization as soon as this week, he said.
“What we have to do now over the next six months is get (Titan) integrated into L-3 so it’s one family,” Lanza said. “We intend to do some consolidation, without question. We intend to reduce some costs without question.”
But culture will stay.
“We don’t want to have them lose what they do and try to clone them. We just don’t operate that way,” Lanza said.
Ray and Lanza made their comments on the morning that the Navy celebrated the arrival of an experimental ship called Sea Fighter to San Diego, which will be its home port. The Navy gave the executives, members of San Diego’s defense community, and three congressmen a ride on the twin-hulled ship, demonstrating a speed in excess of 57 mph , which is very fast for ocean travel.
Rep. Duncan Hunter, the El Cajon Republican and chairman of the House Armed Services Committee, said during the ride that he would like to see the Navy buy 100 such ships.
Titan was Sea Fighter’s prime contractor, though the 262-foot ship was actually built in a subcontractor’s shipyard in the Pacific Northwest.
In terms of revenue, shipbuilding has been a side business for Titan (and will be a minor part of the business going forward, Lanza said). Titan places more of a focus on information and communications systems. That includes systems for command, control, communications, intelligence, surveillance and reconnaissance.
The minds behind those projects now work for L-3. So do Titan’s representatives in Washington, D.C., which apparently makes Lanza happy.
“They have an incredible discipline that they’ve established in their business development area,” he said. “They have a win ratio of 50-60 percent, so they do very well.”
Weeks before the merger closed, Lanza said, he paired the Titan business development team with L-3 employees to pursue a deal in Mississippi. Going after the win is L-3’s Integrated Systems unit, which specializes in aircraft modification, avionics and other special-purpose airborne systems.
L-3’s other specialties include intelligence, surveillance and reconnaissance systems, secure communications systems, high-tech products and government services. The company had $6.9 billion in revenue during 2004.
Lanza said that with the acquisition, L-3 looks forward to a $12 billion year in 2006.
That status , which makes L-3 the nation’s sixth-largest defense contractor , opens options for L-3.
“I think we can now go after bigger programs,” Lanza said. “There are important programs on the horizon over the next couple of years that really neither one of us (Titan or L-3) could bid without getting a lot of partners.”
The executive said L-3 stands to be a “formidable partner” to the defense community’s “five gorillas”: Boeing, General Dynamics, Lockheed Martin, Northrop Grumman and Raytheon.
Lanza said he plans to continue L-3’s pattern of growing by acquisition , though something as big as Titan, with its $2.05 billion in 2004 revenue and $2.5 billion projected for this year, is not likely to come along soon.
“We’re still going after the niche companies, the companies that are $30 million to $200 or $300 million,” he said. Acquisitions were in the works as he was speaking, he added.
L-3, which had some units in San Diego before the Titan purchase, increases its California presence from 4,000 to nearly 8,000 employees with the Titan purchase, Lanza said.
Lanza was with Loral Corp. from 1972 to 1996, spending the last 15 years as president and chief operating officer. Lockheed Martin acquired Loral in 1996. Lanza became chairman and CEO of L-3 in 1997.
L-3 trades on the New York Stock Exchange as LLL. L-3 is redeeming Titan shares for $23.10 apiece.