Laurel firm being bought by Northrop

$33 million deal for DPC and its growing business

No job losses expected

Information-technology company adds about 180 to buyer's payroll

Defense industry

May 20, 1999|By Sean Somerville | Sean Somerville,SUN STAFF

Northrop Grumman Corp. said yesterday that it will buy Data Procurement Corp. Inc., a Laurel-based company that handles information technology procurement for the Department of Defense, in a transaction valued at $33 million.

The purchase of DPC, which employs about 180 in Laurel and Fort Meade, is the latest of several deals to deepen Los Angeles-based Northrop's investment in information technology.

"IT is a relatively high growth business, whereas much of their other operation is relatively slow growth," said Paul H. Nisbet, an analyst who follows Northrop Grumman for JSA Research Inc.

One of the largest moves into information technology came about a year ago, when Northrop Grumman acquired Herndon, Va.-based Logicon Inc., a maker of advanced defense electronics and training systems, in a stock swap worth about $740 million.

The DPC deal, largely a stock transaction, is expected to become final in about 30 days. DPC, which provides information technology services to the Department of Defense and federal intelligence agencies, will be an operating unit of Logicon. DPC's sales last year were $60 million, Logicon had sales of $1.1 billion.

No job losses are expected to result from the merger, said Robert Koch, the director of corporate communications for Logicon. "It will stay just as it is," he said.

Koch said the transaction will strengthen the out-sourcing business of Logicon, which already has an operation that resells software to the federal government.

"The expertise of DPC Technologies in the IT services market strongly aligns with Northrop Grumman's strategic thrust within the defense and intelligence communities in this area, and is consistent with our corporate objective to acquire companies that enhance and broaden our existing strengths," said Kent Kresa, Northrop Grumman chairman, president and chief executive officer.

Frank Derwin, DPC's senior vice president of advanced programs who will lead DPC within Logicon, said the deal will strengthen service to customers and provide additional opportunities for employees.

The deal will add slightly to Northrop Grumman's Maryland employment of about 7,400.

In a broad sense, the merger is a small part of Northrop Grumman's attempt to recover from the collapse last year of the company's proposed merger with Lockheed Martin Corp.

Northrop Grumman shares, which traded at $108.8125 a year ago yesterday, fell in July after Lockheed abandoned plans to buy Northrop Grumman in the face of federal antitrust opposition. Northrop Grumman shares rose 75 cents to $68.6875 yesterday.

Nisbet, the JSA Research analyst, said Northrop's options for acquisitions are limited. "Their stock price has dropped, and they have heavy debt from the acquisitions of Logicon and Grumman," he said.

Still, Nisbet said, he has a "buy" rating on Northrop Grumman stock, in part because more defense mergers are possible.

He said companies may feel that they have a diminishing time to act since an approaching change in the law will take away the tax advantages of defense mergers.

Pub Date: 5/20/99

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