67.6 F
San Diego
Sunday, Jul 14, 2024

Titan, Lockheed Deal Delayed to April

Titan, Lockheed Deal Delayed to April

Local Firm Adds to Reserves To Cover Potential Liabilities From

Federal Investigation


Titan Corp. shareholders postponed their vote on the proposed sale of the company to Lockheed Martin Corp. from March 16 until April 12, a date presumably when the results of a federal criminal investigation into Titan’s payments to foreign consultants are known.

Bethesda, Md.-based Lockheed Martin agreed last year to purchase Titan for $2.4 billion including debt of more than $500 million in a deal that has been put on hold because of the federal probe, which began last month.

The probe centers on payments made by Titan to foreign consultants, and which may have violated the Foreign Corrupt Practices Act, the companies have said.

In a recent filing with the Securities and Exchange Commission, Titan put $3 million into its reserves last year to cover potential liabilities arising from the investigation.

Titan spokesman Wil Williams said the decision to set up a reserve for potential fines was standard procedure and should not be construed that actual fines will be levied.

“It could be that amount, or it could be zero,” he said.

In addition to delaying the Titan shareholders’ meeting, Titan and Lockheed agreed to extend the deadline for the completion of the planned acquisition from March 31 to April 20. The companies did not amend any other parts of the original agreement.

In the wake of the delayed shareholders’ meeting, the prices of both companies stock increased even though most analysts said the delay put the proposed deal at increased risk.

David Michaels, managing director for Montgomery & Co. LLC, a Del Mar-based investment banking firm, said in the wake of accounting scandals of recent years, and the passage of Sarbanes-Oxley securities reforms, companies are far more careful about making acquisitions and taking a harder look at potential liability issues that could affect their futures.

Political Fallout

Michaels said Lockheed has to consider possible political fallout in case Titan is found to be criminally liable and still does the deal. That finding may affect future government contract, and damage the benefits from the acquisition, he said.

He said the agreement between Titan and Lockheed likely contains provisions for Lockheed to either terminate the purchase, or renegotiate the price should the government probe uncover past criminal activity.

Titan said the activities being reviewed by government agents involve payments to consultants helping Titan in the export of some hand-held radios. Titan’s foreign sales amounted to about 2 percent of its total, the company said.

Titan’s overall business has been growing well in recent years, as the diversified defense contractor picked up many contracts associated with the Department of Homeland Security, and with various defense units for information services. It reported net income of $28.4 million on revenues of $1.8 billion last year, up from a net loss of $272 million on revenues of $1.4 billion in 2002.

The company added about 1,000 new employees over the past year, bringing its total to about 12,000 employees, including more than 1,300 working in San Diego, Williams said.


Featured Articles


Related Articles