Northrop makes bid for TRW

  • Friday, February 22, 2002 9:00pm
  • Business

Associated Press

NEW YORK — In a bid to gain a foothold in the lucrative military satellite market dominated by Boeing and Lockheed Martin Corp., defense giant Northrop Grumman Corp. made a surprise $5.9 billion offer Friday to buy TRW Inc.

TRW shares soared more than 26 percent in response to the unsolicited bid, closing above the offering price on speculation that other bidders — such as rivals General Dynamics Corp., Lockheed or Boeing — could emerge, or that Northrop might raise its bid.

In an interview, Northrop chief executive Kent Kresa called the bid "a very fair offer," but TRW labeled it low and "regrettable," coming just days after its chief executive announced his departure, news that had pushed the company’s stock down.

Cleveland-based TRW makes space and defense products including spacecraft and satellites, defense communications equipment and high-energy lasers.

Northrop would sell TRW’s automotive parts business, which accounts for 64 percent of TRW’s sales and 58 percent of profits, if TRW accepts Northrop’s offer. Kresa declined to estimate how much the division would fetch.

Analysts said Northrop would benefit most from TRW’s satellite production unit, which makes satellites used by the military to spy on enemies and coordinate the movement of troops, ships and airplanes. Northrop make sensors for satellites, but is a relatively small player in the market for military products used in outer space.

"Northrop Grumman doesn’t have very much presence in space, and TRW is a leader in space. The theory is, it’s a growth opportunity," said John Pike, director of the GlobalSecurity.org defense analysis think tank.

TRW has also been involved in the U.S. ballistic missile program for nearly 50 years and is the Pentagon’s prime contractor for intercontinental ballistic missiles, the chief delivery vehicle for nuclear warheads.

And TRW’s information technology unit that makes software used to run weapons systems would complement Northrop’s IT division, said Paul Nisbet, an analyst with JSA Research.

Kresa said Northrop executives have not yet spoken with officials at the Defense Department and Justice Department who would have to approve the deal, but said lawyers predict there will be no significant antitrust hurdles. A Northrop-TRW combination would also need approval from the European Union.

"We feel very comfortable that we have no significant overlap that would give us a problem," Kresa said.

Kresa didn’t disclose whether Northrop would be willing to raise its bid, but analysts said it could represent the first volley in a wave of offers — noting that Northrop successfully outbid General Dynamics last year in another takeover contest, paying $2.1 billion to buy Newport News Shipbuilding Inc., the nation’s only nuclear aircraft carrier builder.

Northrop said the deal with TRW would generate sales in 2003 of between $26 billion and $27 billion, putting the company slightly ahead of Lockheed Martin, the largest U.S. defense contractor, in terms of total sales.

But based strictly on Pentagon contracts, the combined company would still lag behind Lockheed and Boeing, according to the Defense Department.

TRW was the Pentagon’s eighth largest contractor in 2001 and 2000, with sales of $1.9 billion in 2001 and $2 billion in 2000.

Under terms of the offer, Los Angeles-based Northrop would exchange $47 in stock for each TRW share, an 18 percent premium over the company’s closing share price of $39.80 Thursday on the NYSE. The offer was outlined in a letter dated Thursday to TRW management and released by Northrop on Friday.

Northrop would also assume about $5.5 billion of TRW debt, said Northrop spokesman Frank Moore.

TRW said in a brief statement that its board would review the proposal to determine what action will serve the best interests of shareholders and other constituencies.

However, it added, "TRW finds it regrettable that Northrop Grumman has chosen to make this proposal immediately following the unexpected departure of (TRW’s) former chief executive officer, David Cote, and the aberrationally low stock price that resulted."

Copyright ©2002 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

A closing sign hangs above the entrance of the Big Lots at Evergreen and Madison on Monday, July 22, 2024, in Everett, Washington. (Ryan Berry / The Herald)
Big Lots announces it will shutter Everett and Lynnwood stores

The Marysville store will remain open for now. The retailer reported declining sales in the first quarter of the year.

George Montemor poses for a photo in front of his office in Lynnwood, Washington on Tuesday, July 30, 2024.  (Annie Barker / The Herald)
Despite high mortgage rates, Snohomish County home market still competitive

Snohomish County homes priced from $550K to $850K are pulling in multiple offers and selling quickly.

Henry M. Jackson High School’s robotic team, Jack in the Bot, shake hands at the 2024 Indiana Robotics Invitational.(Henry M. Jackson High School)
Mill Creek robotics team — Jack in the Bot — wins big

Henry M. Jackson High School students took first place at the Indiana Robotic Invitational for the second year in a row.

The computer science and robotics and artificial intelligence department faculty includes (left to right) faculty department head Allison Obourn; Dean Carey Schroyer; Ishaani Priyadarshini; ROBAI department head Sirine Maalej and Charlene Lugli. PHOTO: Arutyun Sargsyan / Edmonds College.
Edmonds College to offer 2 new four-year degree programs

The college is accepting applications for bachelor programs in computer science as well as robotics and artificial intelligence.

FILE — Boeing 737 MAX8 airplanes on the assembly line at the Boeing plant in Renton, Wash., on March 27, 2019. Boeing said on Wednesday, Feb. 21, 2024, that it was shaking up the leadership in its commercial airplanes unit after a harrowing incident last month during which a piece fell off a 737 Max 9 jet in flight. (Ruth Fremson/The New York Times)
Federal judge rejects Boeing’s guilty plea related to 737 Max crashes

The plea agreement included a fine of up to $487 million and three years of probation.

Neetha Hsu practices a command with Marley, left, and Andie Holsten practices with Oshie, right, during a puppy training class at The Everett Zoom Room in Everett, Washington on Wednesday, July 3, 2024. (Annie Barker / The Herald)
Tricks of the trade: New Everett dog training gym is a people-pleaser

Everett Zoom Room offers training for puppies, dogs and their owners: “We don’t train dogs, we train the people who love them.”

Andy Bronson/ The Herald 

Everett mayor Ray Stephenson looks over the city on Tuesday, Jan. 5, 2015 in Everett, Wa. Stephanson sees  Utah’s “housing first” model – dealing with homelessness first before tackling related issues – is one Everett and Snohomish County should adopt.

Local:issuesStephanson

Shot on: 1/5/16
Economic Alliance taps former Everett mayor as CEO

Ray Stephanson will serve as the interim leader of the Snohomish County group.

Molbak's Garden + Home in Woodinville, Washington will close on Jan. 28. (Photo courtesy of Molbak's)
After tumultuous year, Molbak’s is being demolished in Woodinville

The beloved garden store closed in January. And a fundraising initiative to revitalize the space fell short.

Everett Mayor Cassie Franklin, Advanced Manufacturing Skills Center executive director Larry Cluphf, Boeing Director of manufacturing and safety Cameron Myers, Edmonds College President Amit Singh, U.S. Rep. Rick Larsen, and Snohomish County Executive Dave Somers participate in a ribbon-cutting ceremony on Tuesday, July 2 celebrating the opening of a new fuselage training lab at Paine Field. Credit: Arutyun Sargsyan / Edmonds College
‘Magic happens’: Paine Field aerospace center dedicates new hands-on lab

Last month, Edmonds College officials cut the ribbon on a new training lab — a section of a 12-ton Boeing 767 tanker.

Gov. Jay Inslee presents CEO Fredrik Hellstrom with the Swedish flag during a grand opening ceremony for Sweden-based Echandia on Tuesday, July 30, 2024, in Marysville, Washington. (Ryan Berry / The Herald)
Swedish battery maker opens first U.S. facility in Marysville

Echandia’s marine battery systems power everything from tug boats to passenger and car ferries.

Helion Energy CEO and co-founder David Kirtley talks to Governor Jay Inslee about Trenta, Helion’s 6th fusion prototype, during a tour of their facility on Tuesday, July 9, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
State grants Everett-based Helion a fusion energy license

The permit allows Helion to use radioactive materials to operate the company’s fusion generator.

People walk past the new J.sweets storefront in Alderwood Mall on Thursday, July 25, 2024, in Lynnwood, Washington. (Olivia Vanni / The Herald)
New Japanese-style sweets shop to open in Lynnwood

J. Sweets, offering traditional Japanese and western style treats opens, could open by early August at the Alderwood mall.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.