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11/24/92


TITLE #m#Martin Marietta Buying GE Aerospace Unit $3.05 Billion
Deal Fortifies Its Position In Declining Industry Michael Stroud

Reflecting the defense industry's ongoing consolidation, Martin
Marietta Corp. and General Electric Co. announced an agreement
for Marietta to acquire GE's aerospace businesses for $3.05 bil-
lion.  The agreement, which must still be approved by government
regulators and Martin Marietta stockholders, will nearly double
that company's revenue to almost $11 billion. It will also shore
up the Bethesda, Md.-based company's position in satellite com-
munications and defense electronics.

Under the agreement, GE will receive $2.05 billion cash and $1
billion in new convertible preferred stock. The Fairfield,
Conn.-based conglomerate will also gain two seats on Martin
Marietta's board.  The deal will push up Martin Marietta's busi-
ness backlog to about $19 billion, not including roughly $9 bil-
lion in Energy Department contracts.  The merger agreement also
gives Martin Marietta access to GE's Corporate Research and
Development Center for aerospace research.  In a joint release,
top officials at the two companies said the merger will allow
Martin Marietta to "walk into the global arena as No. 1 in its
industry, with twice the resources and a fraction of the overhead
of the two companies that created it." In a meeting with analysts
after the deal was announced, Martin Marietta officials said they
expected the transaction to close by early March.  GE Aerospace,
based in Valley Forge, Pa., has 37,700 employees. With the addi-
tion of that division, Martin Marietta's work force will climb to
about 94,000 workers. GE employs about 284,000 people worldwide.
GE Aerospace makes satellites, missile guidance systems and war-
ship radar systems. The unit has been involved in the Strategic
Defense Initiative, the space-based research designed to protect
the U.S. against missile attack.  The deal comes as the defense
industry continues to contract. Analyst George #m#cq#m#Podrasky
of Duff & Phelps Inc. predicted that government defense spending
will drop by 5% in real terms within five years.  "Many companies
are coping with (that decrease) by getting out of the business or
buying a bigger part of a shrinking pie," Podrasky said. "Martin


Martin Marietta Buying GE Aerospace Unit


Marietta took the second approach." Martin Marietta did not say
whether it intends to lay off workers as it absorbs the GE divi-
sion, but officials at a news conference after the announcement
said they expected to consolidate and restructure Martin
Marietta's businesses in 1993.  Martin Marietta spokesman Phil
Giaramita said he expects the absorption of the General Electric
division to add $1 a share annually to Martin Marietta's earnings
over the next few years.

Boost To Other Businesses

In addition to strengthening Martin Marietta's electronics busi-
ness, the deal helps the company develop its civil government and
commercial businesses.

"By getting together (with GE's aerospace business), we are not
only becoming a healthier firm, but will win some competitions we
would not have won otherwise," said Giaramita.  Bruce Bunch, a GE
spokesman, said the company decided to divest its aerospace busi-
ness because it wanted to remain No. 1 or No. 2 in every business
it participates in.

"As we entered the 1990s, (the aerospace business) was one of
several leaders, but we did not think it had the scale to lead in
the changing aerospace environment," he said. "We were looking
for a merger that would give (the business) more scale, more
technology." GE's aerospace business represented 9% of the
company's $60.2 billion in 1991 revenue, and 10% of its pretax
operating profit of $6.4 billion. The diversified conglomerate's
businesses includes the NBC network, medical systems, major ap-
pliances and computer processing.  The company will retain its
lucrative aircraft engines division, which logged revenue of $7.9
billion and operating profit of $1.42 billion last year.

GE's Aerospace Profitable

Despite tough times in the defense industry, GE's aerospace busi-
ness has remained profitable, with operating income of $655 mil-
lion in 1991 and margins of 12.3%. Analyst Podrasky said the
company's margins have remained stable at between 9.2% and 14.2%
since 1983.  Martin Marietta has made no secret of its interest
in bolstering its defense businesses. The company has suffered
from defense budget reductions that have resulted in the cancel-
lation of lucrative missile contracts.

Earlier this year, Martin Marietta joined with Lockheed Corp. to
bid for LTV Corp.'s aerospace business. The business ultimately
was purchased by a partnership of Loral Corp., Northrop Corp. and
a Washington, D.C.- based investment banking firm.  Indeed, some
analysts had speculated that Martin Marietta, which like much of
the defense industry has suffered tepid earnings and revenue
growth in recent years, might be a takeover candidate itself.  In
1991, the company's earnings dropped 4% to $313.1 million, while
revenue dropped 1% to $6.1 billion.  Meanwhile, the company's Big
Board stock has remained flat at between 35 and 45 a share for
more than a year.  Giaramita anticipated that the combined
company's revenue will be stable through the middle of the de-
cade, but predicted that earnings will grow after the consolida-
tion is complete.

Martin Marietta's Debt

Prior to the merger, Martin Marietta had a debt- to-total-capital
of about 30%, according to Giaramita. The takeover will push that
figure to around 50%, but Giaramita expected it to drop back to
previous levels over the next three years.  News of the prospec-
tive merger pushed Martin Marietta's Big Board stock up 55/8 on
very heavy volume of 1.3 million shares. GE's New York Stock Ex-
change issues climbed 21/8 to 821/8 in slightly elevated trading.

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