Northrop builds 'empire'; Company to purchase defense units from California Microwave

THE BALTIMORE SUN

Northrop Grumman Corp. said yesterday that it will pay up to $98 million to acquire the defense businesses of California Microwave Inc., including its Maryland offices.

The units will report to Northrop's Electronic Sensors & Systems Sector in Linthicum, and will retain the California Microwave name.

Of the 480 employees involved in the transaction, the bulk -- 312 -- are spread among offices in Belcamp, Hagerstown and Baltimore. Another 26 are in Annapolis Junction and 142 are in Woodland Hills, Calif.

A spokesman for Northrop, which is based in Los Angeles, said no layoffs are planned.

"California Microwave is a strong competitor in its niche markets and has unique capabilities that will strengthen our expertise in airborne surveillance, particularly in the tactical area, and broaden our business base," said Kent Kresa, chairman, president and chief executive officer of Northrop.

Most of California Microwave's Maryland business involves the manufacture of airborne surveillance and reconnaissance equipment, mostly for small-scale use by Army helicopters and propeller-driven planes.

That line of work represents about two-thirds of the $95 million in sales the defense portions of California Microwave are expected to register this year, according to Northrop.

A smaller operation in Annapolis Junction is involved in satellite communications, and the Woodland Hills facility develops ground information systems for military mission planning and analysis.

The airborne work will complement the large-scale programs -- such as the Joint STARS surveillance radar -- that are the hallmark of Northrop's Electronic Sensors & Systems Sector, one expert said.

"It's just directly in their area of expertise," said Stuart McCutchan, publisher of the newsletter Defense Mergers & Acquisitions, who praised the deal.

Another factor not to be overlooked, he added, is that most of the California Microwave operations are geographically convenient for Northrop.

"They're building Northrop Grumman's Baltimore empire," he said.

Northrop will pay $93 million in cash for the units, plus an additional $5 million if revenue goals are met next year. The deal is expected to close next month.

The purchase includes the California Microwave name, which Northrop wants because the company is well-respected in the intelligence community, McCutchan said.

The remaining California Microwave operations that Northrop is not buying will be known as Adaptive Broadband Corp., reflecting the company's new emphasis on wireless high-speed data transmission.

Shares in Northrop closed up 18.75 cents yesterday at $61. California Microwave shares rose 93.75 cents to close at $10.50.

Pub Date: 3/12/99

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