Rival deal for shipyard terminated

General Dynamics is out of Newport News picture

October 27, 2001|By BLOOMBERG NEWS

FALLS CHURCH, Va. - General Dynamics Corp. and Newport News Shipbuilding Inc. terminated their merger agreement yesterday, three days after the U.S. government rejected the $2.6 billion combination of the defense contractors.

The Pentagon endorsed Northrop Grumman Corp.'s competing bid for Newport News on Tuesday, as the U.S. Justice Department sued to block General Dynamics' offer because the takeover would eliminate competition for making nuclear submarines.

Newport News, a maker of submarines and aircraft carriers, agreed on April 25 to be acquired by General Dynamics. Northrop matched the offer in May, saying its proposal had a better chance of approval because it would maintain competition. The Pentagon rejected a similar General Dynamics offer in 1999.

Falls Church, Va.-based General Dynamics owns Maine's Bath Iron Works and Connecticut's Electric Boat Co. and makes the U.S. Army's main battle tank as well as Gulfstream business jets. It began losing support for its $67.50-a-share cash offer for Newport News when Northrop Grum- man's stock price soared after the Sept. 11 terrorist attacks.

Los Angeles-based Northrop Grumman and Newport News have been holding talks to reach a buyout agreement since earlier this month.

Shares of General Dynamics rose 91 cents to $86. Newport News, which is based in the Virginia city of the same name, fell 46 cents to $70.64.

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