IN THE 23 YEARS since Bernard Schwartz acquired control of Loral, he has built the company from sales of only $27 million into a $6.7 billion defence-electronics giant, in one of the most aggressive and sustained acquisition sprees in US aerospace history.
The business, which he acquired for just $7.5 million, is now valued at more than $9 billion under the merger deal worked out with Lockheed Martin. That will see Loral's defence-electronics activities absorbed into Lockheed Martin, leaving its remaining space activities free to pursue ambitious growth plans as a stand-alone company.
Schwartz will be chief executive of Loral Space and Communications, which will begin business with more than $700 million in cash and no debt, he says. The new company will own Loral's 31% stake in the $2 billion GlobalStar satellite-communications network, a 33% holding in satellite manufacturer Space Systems/Loral and aircraft-braking company K&F Industries.
The space businesses were not included in the merger because of Loral's "aggressive valuation", says Schwartz, but he also admits that it avoided anti-trust complications.
Lockheed Martin has a $700 million contract to manufacture satellites for Motorola's rival Iridium communications network, but it does not believe that there will be a problem with owning 20% of Loral Space. "They will compete," says Schwartz.
Loral Space's net worth of $1.7 billion is projected by Schwartz to reach $4 billion by 2002, by which time GlobalStar is projected to have 3 million subscribers, generating $2.7 billion in sales, with profits to match. Loral Space also intends to become a service provider in the direct-broadcast market, probably outside the USA, he says.
Schwartz' decision to sell Loral's non-space businesses may result from difficulties GlobalStar has experienced in raising the $2 billion needed to establish its constellation of 48 low-Earth-orbit satellites. So far, $1.4 billion has been raised.
In 1995, the company dropped plans for a $400 million debt offering, opting instead, for $250 million in bank financing secured by Loral. Plans call for a first launch in 1997 and initial operations in 1998.
Source: Flight International
