Loral Corp, New York is a seasoned snapper up of IBM Corp’s unconsidered trifles, having taken the military side of Rolm Corp off IBM’s hands when regulators told the company it could buy Rolm only if it divested the defence interests, and now it has stepped up again and agreed to pay a fancy price for the marginally profitable $2,200m-a-year IBM Federal Systems Co. Loral is to pay $1,575m in cash, to be financed by bank borrowings, and says it will be a $6,000m-a-year company with over 35,000 staff after completion early next year. Loral sees the acquisition as complementary, and has no plans for major changes in its operations or management. It adds to Loral’s avionics, command and control and space capabilities, and takes it into systems integration for commercial and government customers for the first time. Federal Systems Marketing, which sells standard IBM products and services to government agencies, is not part of the transaction. The business being sold sees operating profit this year of $165m, but that is before corporate overheads and restructuring charges, on turnover flat at $2,200m. It has funded backlog of approximately $3,300m and a total backlog of $7,000m. About 60% of the total is business with the Pentagon, and the balance is systems integration for the likes of the US Federal Aviation Administration and the US Postal Service. The price is seen as a very good one for IBM, which is selling the unit because it needs the cash more than it needs the Federal Systems Co.
