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Grumman shows interest in local systems maker

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Posted: Friday, June 9, 2006 12:00 pm

By Debbie Stevenson

Killeen Daily Herald

Two top defense contractors at Fort Hood could fall under the same umbrella, if speculation Thursday on Wall Street is correct.

Shares of L-3 Communications Holdings Inc. soared Thursday on speculation that Northrop Grumman Corp. might buy the military's leading communications systems maker. The rumors followed the death of L-3 co-founder Frank Lanza.

Lanza, 74, died Tuesday while recovering from surgery to deal with complications caused by acid reflux.

Lanza founded New York-based L-3 in 1997. With roots in defense contractors such as Lockheed Martin Corp., the No. 1 federal prime contractor, Lanza is credited with building L-3 through a series of buyouts and keeping shareholders happy with a 110 percent rise in their stock value in the last five years. A $2 billion buyout of Titan Corp. last year will go down as Lanza's largest deal.

The name L-3 was formed from the names of Lanza, business partner Robert LaPenta and company financiers Lehman Brothers.

Forbes estimated the company's market value at $9.93 billion with $12.3 billion expected in revenues for this year.

Last year, L-3, which has 44,200 employees and is ranked 15th on the federal prime contractors list for 2005, took the lead role on $4.7 billion worth of Defense Department contracts last year, according to Pentagon reports.

At Fort Hood, L-3 Communications Vertex Aerospace LLC has a 10-year contract worth up to $2 billion signed Aug. 14, 2004, to provide aviation joint administrative management support services, according to the post's contracting command Web site.

Northrop Grumman, the No. 2 federal prime contractor, has a railhead operations contract worth more than $2.8 million at Fort Hood. The corporation posted a record $30.7 billion earnings for 2005.

Representatives from both companies did not respond to calls seeking comment Thursday.

Bloomberg reported shares of L-3 had jumped more than 7 percent to $78.05 by mid-afternoon in New York Stock Exchange composite trading. Earlier, they climbed to $78.47, the biggest increase since July 2004.

The jump followed a slump in April after Lanza disclosed his health problems.

Also eyeing a possible L-3 acquisition are Lockheed Martin, General Dynamics, Raytheon and Boeing, Bloomberg reported. All were in the top 10 of the federal prime contractors list for 2005.

Contact Debbie Stevenson at deborah@kdhnews.com

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