L-3 Founder Dies, Leaving Company's Future in Doubt

Frank C. Lanza, the forceful personality behind L-3 Communications Inc., died unexpectedly late Tuesday, spurring questions about the future of the $10 billion defense contractor, whose diverse businesses include providing translators in Iraq and making unmanned drones.

Lanza, 74, had surgery on his esophagus two months ago to relieve acid reflux. The New York-based company did not release the cause of his death.

L-3's stock price immediately jumped on speculation that without Lanza the company would be vulnerable to a takeover attempt. L-3 shares rose $3.44, to $76.93.

"We are all shocked and saddened by the passing of Frank C. Lanza," Robert B. Millard, the company's lead director, said in a written statement. Lanza, the chairman and chief executive, visited a doctor Tuesday and his recovery was considered satisfactory, according to the statement. His death was "sudden and unexpected," the statement said.

Lanza, who was once considered a candidate to be chief executive at Bethesda-based Lockheed Martin Corp., where he was an executive for years, was among the defense industry's most aggressive acquirers. After co-founding L-3 as a spinoff of Lockheed in 1997, he orchestrated deals sometimes at a pace of one a month, buying more than 80 other companies and building L-3 into the Pentagon's ninth-largest contractor.

L-3's largest acquisition in recent years was the $2 billion deal for San Diego-based Titan Corp., a defense technology company that supplies thousands of translators to the military. It also acquired companies that make small portable drones for the military, one that makes the machines that scan luggage at airports for explosive devices, and another that recruits soldiers for the Army.

Lanza was known as an executive who got involved in the details of even the smallest acquisition. "I can tell you, he was unchanged despite all of our success," said Robert V. LaPenta, a co-founder of L-3, who began working with Lanza in 1972.

L-3's board met yesterday but did not make an announcement about the company's leadership. The company did not have a public succession plan. L-3's 10 chief operating officers are "making sure the company continues to function seamlessly," said Abby Cohen, a company spokeswoman.

The ambiguity generated speculation on Wall Street about L-3's future, with some predicting that the company directors would hire a new chief executive from among their ranks, others that a wide-ranging search for a new leader will begin and others betting that L-3 will be put up for sale.

"We contend that the uncertainty regarding company leadership going forward raises additional questions surrounding [L-3] potentially being acquired," Ronald J. Epstein, analyst for Merrill Lynch, said in a research note yesterday.

Lanza started L-3 with LaPenta and funding from Lehman Brothers, each representing one of the L's in the company name. It initially included business units that Lockheed no longer wanted. Lanza's style, which included allowing many of the acquired companies to continue to operate independently and to keep their names, has always been considered risky by Wall Street.

"We have long believed that the company could develop operational issues due to the difficulties inherent in assembling a large number of acquisitions," Joseph B. Nadol III, a J.P. Morgan Securities analyst, said in research note yesterday. "This risk is exacerbated by the absence of Mr. Lanza's presence."

The hodgepodge of firms might be difficult for a large defense contractors to absorb, some analysts said. It is more likely that the company would be broken up into different parts, they said.

"There are logical buyers for pieces of L-3, but not for the entire company," said Stuart McCutchan, publisher of Defense Mergers & Acquisitions. "This a strong company and, well managed, it could stay the course. I think there would be a lot of savvy CEOs out there that would be interested in Mr. Lanza's job."