Northrop Grumman Corp. completed a $10.7 billion takeover of TRW Inc. yesterday, capping a three-year spurt of mergers and expansions that has transformed the company into one of the giants of the American defense industry.
By absorbing Ohio-based TRW, Northrop Grumman becomes a top manufacturer of satellite and space technology, adding to its already strong position in the shipbuilding and defense electronics markets.
The merged company will employ 120,000 people and its annual sales will approach $25 billion, rivaling that of defense leader Lockheed Martin Corp. and perhaps exceeding the military business of Boeing Co.
Once known primarily as a manufacturer of aircraft, particularly the B-2 stealth bomber, Northrop Grumman complained as recently as three years ago of second-tier treatment from the Pentagon, which awarded most its major aerospace contracts to Boeing and Lockheed Martin.
But since then, after the $5.2 billion takeover of Litton Industries, the $2.6 billion buyout of Newport News Shipbuilding and now the TRW deal, Northrop Grumman has vaulted back to a top spot in the industry.
The company is the nation's largest builder of warships and a top purveyor of military electronics, satellites, flying drones and other technologies that have come to define the modern American military.
"It's been a 180-degree turnaround for them" said Peter Arment, an aerospace analyst for JSA Research in Newport, R.I.
"They clearly had a good strategic plan, stuck to it, and now they are very much in growth mode and will be for the next several years," Arment said.
Shareholders of TRW approved the takeover deal at a meeting in Cleveland yesterday morning, followed a few hours later by approval from Northrop Grumman shareholders in Santa Monica, Calif.
Officials at Northrop Grumman headquarters in Los Angeles announced the completion of the merger yesterday afternoon.
Justice Dept.'s OK
The deal's closing came a day after the Justice Department consented, having reached an agreement with Northrop Grumman that requires the company to continue selling its satellite components at a fair price.
Because of Northrop Grumman's now-formidable stake in the military satellite business, competitors were concerned about being shut out of the market.
The merger will have no immediate effect on Northrop Grumman's operations in Maryland, where the company employs more than 10,500 people, company spokesman Randy Belote said.
TRW will operate as a stand-alone, wholly-owned subsidiary, dropping the TRW name but retaining its primary operations in California and Northern Virginia.
Northrop Grumman's Electronic Systems sector, whose headquarters are in Linthicum, is expected to eventually reap some benefits from TRW's profitable space and electronics businesses, however.
The former Westinghouse operation manufactures military radar, electronics and other technical systems and is Northrop Grumman's largest division, with sales last year of $4.7 billion.
"With TRW, we will be a strong competitor in virtually all areas of defense and are well positioned to meet future challenges in fields such as homeland security, missile defense and information warfare," said Kent Kresa, Northrop Grumman's chief executive officer, in a statement announcing the shareholder vote.
Northrop Grumman first proposed a takeover of TRW in February, making an unsolicited offer of $47 for each TRW share.
Offer was rejected
TRW's directors rejected the offer and the bid turned hostile, with Northrop Grumman taking a revised $53-per-share pitch directly to TRW's shareholders.
After several months of negotiations, the two companies reached an agreement in July under which Northrop Grumman would pay $60 a share, or roughly $6.7 billion at yesterday's prices.
The company also will absorb about $4 billion in TRW debt. Northrop Grumman expects to sell TRW's automotive parts business early next year to the Blackstone Group for $4 billion.
Shares of Northrop Grumman fell 12 cents on the New York Stock Exchange yesterday, closing at $96.50.