NEW YORK -- Loral Corp. said Monday it will acquire the Federal Systems Company division from International Business Machines Corp. for $1.575 billion in cash.
Approximately 60 percent of Federal System's business is Department of Defense-related and 40 percent is systems integration applications for such agencies as the Federal Aviation Administration and the U.S. Postal Service.
FSC also has a substantial international business base.
The deal is due to close during the first calendar quarter of 1994 and is subject to conditions including clearance by regulators, Loral said.
Last month IBM said it had received several bids for Federal Systems.
According to market analysts, IBM had received bids from American Telephone & Telegraph, Martin Marietta Corp., the Carlyle Group and the Hughes Aircraft division of General Motors.
Loral said the acquisition will be 'anti-dilutive,' beginning January 1, 1994 and will be financed through bank borrowings.
Federal Systems Marketing, which sells standard IBM products and services to governmental agencies, is not part of the transaction, IBM said.
Following the acquisition, Loral said it will have combined annual revenue of approximately $6 billion, a backlog of $5.7 billion and over 35,000 employees.
IBM Chairman Louis V. Gerstner Jr. said, 'The Federal Systems Company has a dedicated, highly skilled work force and this division consistently has been a leader in the highly specialized governmental marketplace.
Federal Systems had revenues of nearly $2.2 billion last year.
'Nevertheless, this market is changing rapidly today and we have determined that this sale is in the best long-term interest of IBM and its shareholders.'
Bernard L. Schwartz, chairman and chief executive officer of Loral, said, 'IBM's Federal Systems division, which provides advanced information technology products and services, including complex systems integration and aerospace solutions, is a unique entity and its acquisition is a special opportunity to extend Loral's strategic direction.'
Loral said Federal Systems Co. expects 1993 operating income, before corporate and restructuring charges, of $165 million on revenues of approximately $2.2 billion.
It has funded backlog of approximately $3.3 billion and a total backlog of $7 billion.
'FSC is well managed and has a strong technology and program base. Moreover, its operations and technologies fit extremely well with Loral's -- they are complementary, with a minimum of overlap. We have no plans for major changes in its operations or management,' Schwartz added.
