Last night, Lockheed Martin (NYSE:LMT) agreed to acquire Titan Corporation (NYSE:TTN) for a combination of cash and stock totaling $22 per share, a roughly 30% premium over yesterday's close. Including the assumption of $580 million in debt, the total value of the deal is approximately $2.4 billion.

Titan, based in San Diego, provides information and communication systems, with a focus on homeland security, almost exclusively to the U.S. government.

Last year, Titan lost $271.5 million on revenues of $1.39 billion. However, before the deal was announced, Titan's share price had more than doubled off its April 11 close of $7. Perhaps with good reason: Over the past 18 months, Titan has won over a dozen contracts worth more than $100 million.

Last week, the company said that it expects 2003 revenues to increase roughly 25% to between $1.73 billion and $1.78 billion. Its backlog of orders is up 15% to $4.65 billion. Titan also expects to earn $0.70 to $0.72 per share this year.

While not cheap at 14 times 2004 EBITDA, the acquisition strengthens Lockheed Martin's relationship with the U.S. government and provides an expanded presence in information technology. Clearly, homeland security has become more prominent (and profitable) in the wake of the September 11 terror attacks.

Titan shares are up 25% to $21.28 in midday trading.

You can reach Jeff Hwang at [email protected]