Demand exceeds Northrop offering 7 million shares sold within 3 hours

June 05, 1996|By Ted Shelsby | Ted Shelsby,SUN STAFF

Northrop Grumman Corp.'s secondary stock offering outperformed expectations yesterday as investors drove up the price, prompting the company to issue far more shares than planned.

The company had intended to offer 7 million shares in simultaneous stock offerings in the United States and abroad. Within three hours, those shares had sold. An additional 1.05 million shares were issued.

On Wall Street, Northrop's shares rose nearly 4 percent before closing at $65.75, up $2.50.

Northrop Grumman will use the proceeds to reduce the debt it incurred in March when it acquired the Linthicum-based defense arm of Westinghouse Electric Corp.

"We're oversubscribed," said James Taft, a spokesman for the Los Angeles-based defense contractor that paid $3.6 billion for the former Westinghouse Electronic Systems Division. "We'll end up selling 8.05 million shares. We're heartened by that. It means the investment community is confident about the future of this company."

Paul H. Nisbit, president of JSA Research Inc., in Newport, R.I., was surprised by the market's response.

"It's strange. When they first announced plans for the offering a month ago, Northrop's stock actually went down. I guess that all of a sudden investors have recognized this as a good thing," Nisbit said.

Proceeds of the sale will be used to cut the company's net debt to $3.75 billion from the current $4.2 billion.

CS First Boston, Merrill Lynch & Co., and Solomon Brothers Inc. are managing the syndicate that initially offered 5.95 million shares on the U.S. market.

Another 1.05 million shares were set aside for the international market.

The offering lessens the chances that Northrop will have to sell parts of its business, including some of its Maryland operations, to reduce its debt.

Pub Date: 6/05/96

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