FTC OKS LOCKHEED PURCHASE OF LORAL.

Byline: John Diamond Associated Press 

The Federal Trade Commission approved on Thursday the $9.1 billion merger of Lockheed Martin and Loral corporations, a move that will turn two defense giants into a single behemoth.

The approval came hours after the Pentagon released a letter endorsing the deal and saying it would have little impact on the government's ability to buy weapons from competing sources.

Approval came in a 5-0 vote. Pentagon officials said the merger is expected to take place Monday.

In a letter to the Federal Trade Commission, which has final say, Deputy Defense Secretary John White said the Pentagon had settled some of its concerns about buying goods competitively through negotiations with the two companies.

``We will continue to be able to maintain adequate competition for Department of Defense purchases,'' White said in the letter to FTC Chairman Robert Pitofsky. ``Equally important, we determined that the transaction will provide substantial savings and cost avoidance for the department.''

Under the deal, first announced in January, Lockheed Martin Corp., the largest and most diverse military contractor in the United States, will buy most of Loral Corp., a leading maker of defense and aerospace electronics and computer systems, for about $9.1 billion. Lockheed Martin is based in suburban Bethesda, Md.; Loral, in New York.

If the deal goes through, Lockheed Martin will receive a $175 million breakup fee.

Lockheed Martin, with about 165,000 workers, has eliminated 19,000 jobs since its creation in 1994 by an earlier merger. But executives said they don't expect to make massive cuts after absorbing Loral, which employs 38,000.

Lockheed Martin, with revenue of $22.9 billion last year, makes the F-16 fighter and is developing the F-22 stealth fighter, one of the top Pentagon procurement programs. It is also the No. 1 rocket builder in the United States and, like Loral, has electronics and satellite businesses.

While Loral made the bulk of its $6.7 billion in revenue last year from defense sources, its businesses are highly diversified, including radar-jamming electronics for jet fighters, missile systems, aircraft data and voice recorders, flight simulators and air-traffic control systems.

Combined, the companies would take in about $30 billion a year.

The FTC agreement amounts to a settlement of charges filed earlier by the commission that the deal would violate antitrust laws by reducing competition in several weapons and high-technology markets, including markets for fighter jets, air-traffic control systems, satellites and unmanned aerial vehicles used by the military for reconnaissance.

As part of the transaction, Loral's space and telecommunications business would be transferred to a new entity, Loral Space & Communications Ltd.