Northrop to buy Columbia intelligence firm Essex

November 09, 2006|By Allison Connolly | Allison Connolly,Sun reporter

Northrop Grumman Corp. has agreed to buy Essex Corp., a Columbia intelligence firm with strong ties to the National Security Agency, for $580 million, the companies announced yesterday.

Northrop Grumman's proposal includes Essex's debt and a cash offer of $24 a share for all of the company's outstanding shares, a 20 percent premium over the local company's $19.98 closing price yesterday. The purchase, which was announced after the end of regular trading, is expected to close in the first quarter of 2007, pending shareholder approval and antitrust clearance.

The deal expands Northrop's footprint in Maryland, where it already is one of the largest employers with 9,000 workers, mostly in Anne Arundel County.

Essex is the star of a Cinderella story. It was expected to go out of business when chief executive Leonard E. Moodispaw, a former National Security Agency analyst, came on board in 1998.

The company began building revenue from its optical processing technology, and after it landed significant contracts with NSA, the company's bottom line mushroomed. Essex went public, made five acquisitions and now employs nearly 1,000 people, 600 in Maryland. In October, Essex made its latest acquisition, buying Adaptive Optics Associates Inc. of Cambridge, Mass., for $40.3 million.

Adaptive Optics develops and manufactures optical equipment, including devices that correct light distortions.

During a conference call with analysts, Moodispaw said selling the company will help bring its products and technologies to customers faster with Northrop Grumman's resources.

He said the fact that Northrop is willing to pay a premium for the company shows the company's technology is valuable.

Essex shares closed at $19.98 yesterday, up 33 cents, while Northrop Grumman fell $1.42 to $64.98.

In a separate statement, Moodispaw reflected on how far Essex has come.

"For our shareholders, we have increased the enterprise value of the company from less than $20 million in 2000 to approximately $580 million under the proposed acquisition," he said.

"After careful deliberation, we on the board of directors believe it is time to declare victory and success for all, and at a price that represents an attractive valuation to our shareholders," Moodispaw said.

He added that it was not an end, but a "new beginning, ripe with new opportunities."

Essex will operate as a business unit within Northrop Grumman's Mission Systems sector, which is based in Reston, Va.

Essex also reported third-quarter results yesterday. Revenue rose 56 percent to $66.5 million from $42.7 million for the third quarter last year.

Earnings were flat at $2.4 million, or 10 cents per diluted share, compared with $2.2 million, or 10 cents per diluted share, in the quarter last year.

The company increased its 2006 revenue guidance to $250 million-$260 million, from $240 million-$250 million.

allison.connolly@baltsun.com

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