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Feds spurn Lockheed plan
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March 18, 1998: 4:13 p.m. ET
Regulators reject attempts to allay fears over merger with Northrop
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NEW YORK (CNNfn) - Government regulators rejected the latest proposals by Lockheed Martin Corp. and Northrop Grumman Corp. Wednesday to ease concerns over their planned $9 billion merger.
Regulators felt that the two defense firms hadn't gone far enough to win approval. "We had an offer. There was a counteroffer and it was inadequate," a government source told CNNfn.
Defense industry giant Lockheed Martin said it proposed selling some of its operations and presented a consent decree to help eliminate any perceived vertical integration concerns and foster competition.
Federal regulators rejected the offer by Lockheed Martin and Northrop Grumman to divest businesses with as much as $1 billion in sales in order to get the government's green light on their proposed merger.
Lockheed Martin (LMT) said its latest initiatives provide for an economically viable transaction, ensure significant cost savings to the government and preserve a strong national security industrial base.
The companies unexpectedly announced earlier this month that the government fundamentally opposed the merger, which would result in a combined firm with 230,000 employees and sales of $37 billion. It would have the strength to take on Boeing Co., which recently completed its $14 billion purchase of McDonnell Douglas Corp.
Lockheed, best known for its F-16 fighter, C-130 cargo plane and F-117 stealth fighter, and Northrop (NOC), which makes the B-2 stealth bomber, agreed not to complete the deal until April 24, a month later than the March 24 date they had set earlier. The proposed merger was first announced last July.
"Since first learning of the government's concerns regarding this transaction, we have made every effort to work with the government to resolve the issues raised and our discussions continue," Lockheed said, adding it believed it addressed the concerns over horizontal and vertical integration.
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