Northrop raises bid for TRW to $53 a share from $47

Target firm's shareholders to vote on offer in a week

April 16, 2002|By Robert Little | Robert Little,SUN STAFF

Northrop Grumman Corp. has sweetened its offer to buy aerospace company and auto-parts maker TRW Inc., intensifying Northrop's hostile bid to merge its way to the top of the American defense industry.

Northrop Grumman raised its per-share offer from $47 to $53, one week before TRW shareholders are scheduled to vote on the company's takeover bid.

TRW officials, who have repeatedly called Northrop Grumman's initial offer too low, said they would respond "in due course" to the new offer, which was announced Sunday night.

But analysts said yesterday that $53 per share will be difficult for TRW officials to brush aside. It represents a 33 percent premium over TRW's closing stock price the day before Northrop Grumman's initial offer was announced.

"The valuation looks pretty good this time," said Scott W. Keller, who tracks mergers for DealAnalytics.com. "TRW didn't really have to react to the earlier offer because it was just woefully insufficient. But this one really applies some pressure. Shareholders are going to want to push this thing through."

Northrop Grumman first offered to buy TRW in late February, saying it hoped to absorb the Cleveland-based company's aerospace business and sell or spin off its business making air bags and other automotive parts. The takeover bid quickly turned hostile.

After TRW executives rejected the offer as too low, Northrop Grumman announced that it would bypass management and take its offer directly to shareholders. TRW subsequently announced plans to spin off the automotive business on its own.

TRW shareholders are expected to vote on the takeover bid April 22, by deciding whether to open negotiations with Northrop Grumman and give it access to private financial data so it can conduct a "due diligence" investigation of TRW's business.

Kent Kresa, Northrop Grumman's chairman and chief executive officer, said his company increased its offer to buy TRW because changes in the economy and the defense budget have made the company more valuable.

"We strongly encourage TRW shareholders to send a strong message to their board of directors in favor of inviting us to conduct due diligence," Kresa said. "If the TRW board continues to deny us access, this offer will not proceed."

Northrop Grumman Corp.'s product line includes stealth bombers, nuclear aircraft carriers and numerous military radar and electronics systems made by its Linthicum division, the company's largest. It expects sales in 2002 of roughly $18 billion. By absorbing TRW's $6 billion defense business, Northrop Grumman could unseat Lockheed Martin Corp. as the largest defense contractor in the nation.

Shares of TRW rose 30 cents yesterday to close at $52.27. Northrop Grumman shares fell $3.42 to close at $114.89.

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