Lockheed Martin PAE unit sale near-sources

* Lockheed Martin getting final bids for PAE Wed-sources

* Veritas Capital, Aecom Tech in final round-sources

* Price seen around $350 mln, 6-7 times EBITDA-sources

* Bidders concerned about U.S. troop pullout-sources

By Soyoung Kim

NEW YORK, Dec 1 (BestGrowthStock) – Lockheed Martin Corp (LMT.N: ) is
in the final stage of talks to sell its military services unit
Pacific Architects and Engineers for about $350 million, people
familiar with the matter said on Wednesday.

Lockheed Martin, which put the PAE division on the auction
block in June, is seeking final bids on Wednesday from a few
remaining buyers for the division that provides military
training services in war zones, the three sources said.

More than 20 parties initially looked at the business, but
several bidding rounds have winnowed down the group to 2 to 3
buyers, including private equity firm Veritas Capital and
engineering firm Aecom Technology Corp (ACM.N: ), two of the
sources said.

The sources asked for anonymity because they were not
authorized to speak with the media regarding the auction.

The PAE unit was initially expected to fetch around $500
million for the largest U.S. defense contractor, sources have
told Reuters.

But now it could be tough to fetch more than 7 times the
unit’s 2010 earnings before tax, interest, depreciation and
amortization of $50 million, the three sources said on

New York-based buyout firm Veritas Capital, which focuses
on the defense and government services sector, bought another
Lockheed Martin division, Enterprise Integration Group, for
$815 million in October.

Aecom provides program and construction management services
for projects like highways and mass transit systems.

Mergermarket first reported the remaining bidders.

Lockheed Martin, which hired Evercore Partners (EVR.N: ) to
run the auction, had drawn interest mostly from private equity
firms like Cerberus Capital Management [CBS.UL], and
engineering and construction firms such as Aecom, Fluor Corp
(FLR.N: ) and URS Corp (URS.N: ), a number of sources have said
since the auction started.

But most of the initial suitors cooled their interest due
to concern over the U.S. pullout from Iraq and Afghanistan and
other business risks, the three sources said on Wednesday.

The PAE division provides services for the military,
peacekeeping missions, personnel recruitment and training and
disaster relief efforts. It operates facilities and provides
base operations support services for the U.S. Defense and U.S.
State Departments, among others.

“There were just more buyers because the price is cheaper,
but they were less interested and more concerned buyers,” one
of the sources said, referring to Lockheed’s EIG unit that was
put up for sale at about the same time as PAE.

“People are trying to get a better sense of what’s going to
happen in the Middle East after the U.S. pullout … Due to the
uncertainty, the valuation exercise is more difficult,” the
source said.

Lockheed Martin spokesman Jeffery Adams said the company
expected to announce a decision regarding the PAE divestiture
at the end of the year or early next year, but declined to
comment further.

Representatives for Aecom declined to comment. Veritas
Capital could not be reached for comment.
(Reporting by Soyoung Kim)

Lockheed Martin PAE unit sale near-sources