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Lockheed calls off merger
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July 16, 1998: 7:36 p.m. ET
Facing Pentagon opposition, Lockheed and Northrop Grumman part ways
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NEW YORK (CNNfn) - Unable to get the Pentagon's blessing and facing a federal antitrust suit, defense titan Lockheed Martin Thursday pulled the plug on its proposed $10.7 billion marriage to Northrop Grumman Corp.
Bethesda, Md.-based Lockheed, which announced plans to merge with Northrop last July, said it could not move forward with the plan under the Pentagon's restrictions.
The Pentagon, which feared the merger would give Lockheed a competitive advantage, announced Wednesday it was prepared to challenge the deal in court. Its antitrust suit was set for trial Sept. 8.
"Our inability to reach an acceptable solution, combined with our concern over the litigation with our principal customer, necessitates this decision," said Vance Coffman, Lockheed Martin's chairman and chief executive officer.
"Continuing the litigation at this point is simply not in the best interests of Lockheed Martin's customers, shareholders or employees," he said.
Coffman added he is "very confident about the future of Lockheed Martin" and said the company will move forward with its strategy of strengthening its position in the global marketplace.
The administration stunned the defense industry earlier this year with its opposition to the proposed merger of Lockheed Martin (LMT) and Northrop Grumman (NOC).
The government claimed the merger would overly concentrate control of important electronics technology within one company.
Lockheed had offered to divest up to $1 billion in assets in an attempt to appease regulators. The companies maintained that after the divestitures, the combined Lockheed Martin/Northrop Grumman would account for less than a quarter of the defense electronics purchased by the government, a figure they say is well below levels that should cause antitrust concerns.
The companies, however, failed to convince the federal government.
"We welcome this decision to abandon the transaction," Joel Klein, Assistant Attorney General for Antitrust at the Justice Department, said in a statement. "This means that the United States government and the American people will continue to receive the highest possible quality of military products and services in the defense of this nation, at the lowest possible cost to the taxpayer."
The Justice and Defense departments, he added, "were united in the view that the proposed merger could not go forward."
The government argued the merger would reduce competition in areas such as electronics and missile warning systems. 
-- from staff and wire reports
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