$2 Billion Plus Debt

L-3 Communications Holdings Inc., is buying Titan Corporation for almost $2 billion in a cash deal designed to make the company more competitive for government business. Assuming Titan's debt will raise the value of the transaction to $2.65 billion.

The deal is expected to close in October. A deal with Lockheed Martin last year came apart after federal investigators began looking into a foreign bribery scheme. Titan sold the offending business, and settled with the Feds to the tune of $28.5 million.

"There just aren't many companies left in that mezzanine area that you can make an acquisition, particularly a company that is so complementary to L-3 and which we don't compete with at all," said Frank Lanza, CEO of L-3, to analysts on a conference call. "We don't compete with Titan. We might have had one competition in the last six or seven years."

Currently based in San Diego, Titan's headquarters are likely to move to New York, although many corporate functions may stay. "Nothing has happened in this area so far," said Mark Sopp, Titan's chief financial officer to the Union Tribune.

L-3 said acquiring Titan will lead to additional government customers, and additional business from the National Reconnaissance Office (NRO), National Security Agency (NSA), U.S. Marine Corps, Federal Bureau of Investigation (FBI) and DoD Intelligence.

 "Titan also has significant special technology assets and resources. One of Titan's key differentiators and valuable assets is its over 9,000 employees with U.S. Government clearances, including over 5,000 employees with top secret and above clearances and more than 2,400 employees with special clearances -- focused on communications, networks, cryptology, signal intelligence, electronic warfare, data fusion, electromagnetic pulse science and analysis of weapons of mass destruction and simulation,"said L-3 in a statement.

The acquisition should add about $2.7 billion in sales annually. L-3 reported revenue of $6.9 billion in fiscal 2004.

FMI: www.l-3com.com, www.titan.com