15 May 02. Northrop Grumman Corp. said on Wednesday it will begin its confidential review of TRW Inc.’s business next week and hopes to complete it in “several weeks” in anticipation of making a formal offer for the company.
Chief executive Kent Kresa told shareholders at Northrop’s annual meeting that both sides have recently agreed on a timetable for the review process, including who would be involved from both sides.
“This is a large transaction and so it will take some time,” Kresa said.
Kresa said the details of the due diligence are covered under the confidentiality agreement that Northrop signed with TRW several weeks ago. Kresa said he was not aware of any other company signing a similar confidentiality agreement, although TRW has said other companies have expressed an interest in bidding for TRW’s businesses.
TRW stock closed Wednesday at $54.75, down 20 cents. Northrop shares ended the day at $121.84 each, down $1.74.
Kresa welcomed a statement by made earlier Wednesday by a Boeing Co. executive that it would not object to Northrop’s purchase of TRW.
At a defense industry analysts’ conference in New York, Boeing vice chairman Harry Stonecipher, responding to a question, said that Boeing would not oppose the deal because consolidation is healthy for the market and generates “efficiencies.”
“I’m delighted that they feel that way,” Kresa said.
Lockheed Martin Corp. has begun to lobby the Pentagon to kill the Northrop-TRW deal, saying it would hurt Lockheed’s ability to compete in the lucrative military satellite market.
Kresa said Northrop’s president and chief operating officer, Ronald Sugar, will participate in the due diligence review of TRW. Sugar was president of TRW until two years ago, when he left for Litton Industries after being passed over for the chief executive job. Sugar joined Northrop as president after Northrop bought Litton last year for $3.8bn.
“He knows a lot about the company,” Kresa said. Kresa, who turned 64 in March, said he plans to retire as chief executive when he reaches the company’s mandatory retirement age of 65 and that Sugar was “the principal internal candidate” to succeed him. Kresa said there is a possibility he would remain with the company as chairman.
In another development TRW Inc. Chairman Philip Odeen said on Wednesday that the defense and autoparts company was in talks with private equity firms on a possible sale of a portion of its autoparts business.
“It would have to be up to 20 percent,” of the unit, Odeen told an investor conference in New York. Odeen said the talks with select financial buyout firms were well “in advance” and were part of its plan to spin-off the auto parts unit.
The spin-off of the autoparts unit is part of an overall breakup plan that TRW is pursuing in parallel with negotiations with hostile bidder Northrop Grumman Corp. (NYSE:NOC – News)
Odeen also said that TRW was continuing talks to sell its aeronautics business and is so far happy with the pace of those talks and with the price being discussed with potential buyers.