Aerospace |
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Lockheed
Martin to Acquire Northrop Grumman in a $11.6 billion deal
The latest merger announcement in the all-to-quickly consolidating defense industry does not have anything to do with McDonnell Douglas or The Boeing Company. Rather, it involves the US.- based companies Lockheed Martin Corp. and Northrop Grumman. Early last Thursday morning, the two companies announced that their boards approved a definitive agreement for Lockheed Martin to acquire Northrop Grumman. The combined operations will have estimated 1997 revenues up to $37 billion with nearly 230,000 employees. Under the terms of the agreement, Northrop Grumman shareholders will receive 1.1923 of Lockheed Martin shares for each share of Northrop Grumman held. At this given rate, the deal represents a 40 percent premium over Northrop's closing share price of $88.875, as of last Wednesday. According to reports, Lockheed chairman and chief executive, Norman Augustine,
sees this as a way to grow in size while increasing efficiency. Lockheed
Martin is the United States' leading defense contractor and maker of the
F16 and the Trident missile. In addition to its own line, it will add Northrop
Grumman's Stealth B-2 bomber 
Following the Northrop Grumman Lockheed transaction, Kent Kresa, chairman, president and chief executive officer of Northrop will join Lockheed's board along with two other members of the Northrop board which are "to be determined." Kresa also will serve as vice chairman of Lockheed Martin. The companies said the transaction is expected to close by the end of 1997. The deal, worth $11.6 billion including $1.07 billion needed to cover Northrop's purchase of Logicon and an estimated $3.3 billion in debt. In response to the Lockheed Martin/ Northrop Grumman acquisition, a Boeing official said the company does not expect any major changes. In a statement released last Thursday, the company official said it would expect to see its "long-standing relationships" with the two companies continue but will "continue to monitor the transaction as it moves through the approval process." The spokesperson calls the merger a "continuation of industry consolidation" supported and advocated by the United State's Department of Defense. And, upon hearing the news, Thomson CSF officials say they may risk being left behind in the restructuring of European industrial capacity if the state retains majority control of the French defense electronics group. The planned merger between Boeing, McDonnell Douglas as well as other companies is consequently dwarfing European defense companies. It seems that future European restructuring moves will be made through wide-ranging agreements at the group level, rather than joint ventures which fragment the technology base, according to one Thomson CSF official. |
and MX missile system. Among other things, the deal allows Northrop to take
a leap from the small "merging" role it has played compared to
its giant industry rivals. Within the past three years, the industry has
gone through a plethora of consolidations, with more than 40 major mergers
and acquisitions. Among those include Boeing's attempt at acquiring McDonnell
Douglas Corp., and Raytheon Co. purchasing General Motors Corp.'s Hughes
Electronics Corp., in addition to Texas Instruments Inc.'s defense operations.