Northrop admits to no regrets on bid

April 09, 1994|By Ted Shelsby | Ted Shelsby,Sun Staff Writer

WASHINGTON -- Although Northrop Corp. will end up paying nearly a quarter of a billion dollars more for Grumman Corp. than rival bidder Martin Marietta Corp. thought it was worth, Northrop's chairman defended the purchase yesterday as a move that will ensure the company's survival as a military aircraft manufacturer.

Under terms of the merger agreement reached earlier this week, Northrop will pay $62 a share, or $2.17 billion, for Grumman. Northrop had raised its original bid of $60 a share, even though Martin never budged from its $55-per-share offer.

"We believe that we bought it at fair market price," Northrop Chairman Kent Kresa said yesterday during a meeting with a small group of reporters at the Jeffersonian Hotel in Washington.

Grumman has been a major supplier of military planes to the Navy since the days of World War II, but this business has dropped off sharply in recent years.

Many defense industry officials predict that the shrinking Pentagon budget will result in only two manufacturers of fighter planes by the end of the decade. The combined Northrop Grumman Corp. would be vying against two formable opponents -- McDonnell Douglas Corp. and Lockheed Corp. -- for one of those slots.

Under New York's incorporation laws and under its own offer, Northrop must purchase two-thirds of Grumman's stock before the two companies can be merged. About one-third of Grumman's stock is owned by employees and retirees.

Renso L. Caporali, chairman and chief executive of Grumman, who was at Mr. Kresa's side during the luncheon meeting, indicated that those shares would be tendered. "Trust me," he said, "that is not going to be a problem."

Mr. Kresa and Mr. Caporali sidestepped questions about Northrop's bidding tactics. Under terms of the bid it submitted on March 24 to meet Grumman's deadline for "best and highest" offers, Northrop said it would pay $60 a share, or $2.04 billion, for Grumman if Martin Marietta did not raise its $55-per-share bid.

But one day earlier, Northrop had offered to pay $62 a share if Grumman accepted its offer and entered into a merger agreement before the March 24 bidding deadline. Grumman did not accept that offer, but the two companies eventually settled on a $62-per-share price anyway. Martin did not raise its original bid.

When asked if Northrop's tactics had backfired, Mr. Kresa declined to respond, saying he wanted to put the bidding process behind him and move forward with the merger of the two companies.

Mr. Kresa said Northrop would not rethink Grumman's earlier decisions to sell or close factories, including Grumman plants in Salisbury and Glen Arm. Grumman has already announced an agreement to sell its Salisbury plant to a Boston-based electronics company. It has said that the Glen Arm machining plant, which has about 100 workers, would be closed if the company cannot find a buyer for the factory.

In answer to a question about Mr. Caporali's role in the new Northrop Grumman Corp., Mr. Kresa said that he would recommend that the chairman be named to the board of directors of the new company and serve on the transition team that combines the two defense contactors.

He stopped short of saying Mr. Caporali would have a key management position with the new company, something Mr. Caporali was promised if Grumman was merged with Martin Marietta.

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