Doesn't TRW have a remote sensing division?
Northrop Proposes Takeover of TRW
Feb 22 10:24am ET
By Arindam Nag
NEW YORK (Reuters) - U.S. defense contractor Northrop Grumman Corp. on Friday unveiled an unsolicited takeover bid for TRW Inc. that would create a powerhouse in satellite and missile-defense systems.
Northrop said it was prepared to offer $47 in Northrop shares for each TRW share, valuing TRW at close to $6 billion.
TRW said its management would "address" the proposal, and it advised shareholders not to take any immediate action.
TRW shares jumped $9.20, or 23 percent, to $49 in early trading on the New York Stock Exchange.
Initial analyst reaction to the Northrop proposal was positive. "I think it is an exciting move, particularly after all the other recent moves the company has made," JSA Research Analyst Paul Nisbet said. "It is a very opportunistic move."
A merger of Northrop and TRW would create a company with annual sales of $26 billion to $27 billion and would combine TRW's aerospace and information businesses with Northrop's defense and commercial systems operations, which include information technology and nuclear and non-nuclear shipbuilding.
Northrop said that after combining the companies, it would separate TRW's auto parts business, which it said was not a good fit with either TRW or Northrop.
Northrop's announcement came just two days after TRW's chief executive, David Cote, who masterminded a dramatic restructuring at the company, resigned to take the helm at Honeywell International . TRW shares fell about 10 percent following news of Cote's departure.
Nisbet said, "TRW just lost its CEO and it has an interim CEO. They (Northrop) have picked on them at a particularly vulnerable point, it would appear."
Northrop said its tax-free $47-a-share offer represented a 22 percent premium over TRW's average share price in the last 12 months.
The offer was made public in a typical "bear hug" fashion in which Northrop Chief Executive Kent Kresa made public a letter to TRW management. Kresa said the companies had been talking for quite some time about a possible combination.
"I am writing at this time to formally propose a transaction for this purpose," Kresa wrote.
Northrop, which has 100,000 employees and operations in 25 countries, asked for an answer from TRW by Feb. 27. It said a definitive agreement could be reached by March 11 and a deal closed by the third quarter. It said it expected "minimal" antitrust problems. |
