May 23 (Bloomberg) -- Barry Rosenstein, the hedge fund manager who joined financier Carl Icahn in a proxy fight with Kerr-McGee Corp., acquired a 3.5 percent stake in U.S. defense contractor Titan Corp. valued at about $64.9 million.

``We bought it because we think it's a good company that has turned things around,'' Rosenstein, 46, founder and managing partner of Jana Partners LLC said in a May 20 phone interview from the fund's office in San Francisco. ``There is also the possibility the company could be sold. I wasn't counting on it. If it happens, it happens.''

Titan, the largest supplier of translators to the U.S. Army and 12th largest supplier of secure computer networks to military and government agencies, may be in takeover talks with companies including L-3 Communications Holdings Inc., the Wall Street Journal and New York Times reported May 19, without identifying the source of their information. Titan in March settled a criminal investigation which derailed a planned $1.66 billion sale to Lockheed Martin Corp. last year.

Titan's shares fell 21 cents to $21.39 at 9:40 a.m. in New York Stock Exchange composite trading. They had risen 15 percent in the previous four trading days.

Jana bought Titan's shares in the first quarter, Rosenstein said, declining to provide the price range at which the stake was acquired. In the first quarter, Titan's shares traded at an average of $17.09, with a high of $18.57 on March 14 and a low of $15.17, on Jan. 19.

Through the end of March, the 21 percent rise in the Jana Offshore Partners open-end fund outpaced the 4.8 percent gain the Standard & Poor's 500 Index.

Jana's 3.01 million shares of San Diego-based Titan make it the company's fifth-largest shareholder.

Kerr-McGee

Titan wouldn't comment on Jana's taking a stake in the company, spokesman Wil Williams said in an e-mailed statement.

``I don't follow or comment on any shareholder activity,'' Williams said.

Jennifer Barton, a spokeswoman for New York-based L-3 declined to comment May 19 on the takeover speculation.

Rosenstein joined billionaire financier Icahn in a March bid to get seats on the board of Oklahoma City-based Kerr-McGee, a U.S. oil and natural-gas producer, as they urged the company to sell its chemicals business and buy back stock. Kerr-McGee said in April it would buy back stock to end the proxy fight.

Sales Forecast

Jana's stake in Titan is a ``portfolio holding,'' which is part of its $4 billion under management, and ``not an activist play,'' Rosenstein said.

Titan forecast April 28 that sales will rise as much as 20 percent to $2.45 billion this year as conflicts in Iraq and Afghanistan boost demand for its translation services, and secure computer networks for military and intelligence agencies.

``I'm comfortable the company's leadership is doing the right things,'' Rosenstein said.

Jana Partners began as a $25 million hedge fund in April 2001 and Rosenstein has been managing partner since then. From 1993 to 2001, he was a principal of Sagaponack Partners, L.P., a private equity fund.

To contact the reporter on this story: Edmond Lococo in Boston at elococo@bloomberg.net.

Last Updated: May 23, 2005 09:46 EDT