Lockheed Martin buys Comsat for $2.7bn

Lockheed Martin and Comsat have agreed to merge through a cash and stock transaction that values the satellite access provider at $2.7bn.

Comsat will eventually be made part of Global Telecommunications, a subsidiary of the giant defence and aircraft corporation, but the deal depends on approval from the US Federal Communications Commission (FCC) and Comsat shareholders.

Lockheed is also counting on a change in federal law which will allow Comsat to be bought - the company has enjoyed close links with the US government since being established under the 1962 Communications Satellite Act.

Comsat provides voice, data and video transmission through being the US signatory to Intelsat and Inmarsat - bodies which provide satellite communications worldwide.

The acquisition marks a significant step in the race to provide global mobile telecommunications services via satellite. In recent weeks, rival satellite networks Iridium and Globalstar have both suffered setbacks. Iridium has been forced to delay its full rollout until the beginning of November, and 12 Globalstar satellites went up in flames after a botched rocket launch in the former USSR.

Lockheed - which was recently forced to abandon an attempt to buy rival Northrop Grumman for $10.7bn - said it would finance the Comsat acquisition by selling stakes in other companies. The company has estimated that the Comsat acquisition may take up to nine months, but that depends on how fast regulators act.

John Sponyoe, CEO of Lockheed Martin Global Telecommunications, said: "This combination accelerates the momentum of Global Telecommunications in its evolution into an enterprise well-positioned to quickly become a premier global communications network service provider."

He said that market is expected to be worth $120bn by 2002, up $70bn from its current value.