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NORTHROP LAUNCHES HOSTILE BID FOR TRW

4 Mar 02. Following the $47 per share offer for TRW announced last week (BATTLESPACE ALERT Vol. 8), TRW Inc. (NYSE:TRW – news) said on Monday that it needed more time to respond to details of a $6bn hostile all-share offer launched by Northrop.(NYSE:NOC – news)

On Sunday, Cleveland-based TRW rejected a Northrop proposal for a $47-per-share deal which was made public on Feb. 22, but on Monday advised shareholders not to take any action until TRW’s board decided on it.

TRW said it would decide on it no later than March 15. Meanwhile, Northrop went straight to shareholders with its offer saying it was valid until March 29. If it could acquire TRW and its satellite and missile defense specialties, Northrop, which makes the B-2 bomber, would position itself to challenge No. 2 U.S. defense contractor Boeing Co. (NYSE:BA – news) just as the Pentagon prepares to boost its spending by tens of billions of dollars.

Northrop said the offer would not be valid if its own shares fell below $103 or rose above $113. Which means it would offer a maximum of 0.4563 shares or a minimum of 0.4159 shares for each TRW share.

Ohio state laws give TRW 10 days to set a date for a special shareholder’s meeting to vote on the bid. It must be held within 60 days of the launch of the tender offer.

TRW shares, which have traded above $50 since Northrop made its approach to the company known, were trading 1.62 percent higher at $50.86 at 1020 EDT on the New York Stock Exchange, $3.86 higher than Northrop’s offer, primarily fueled by speculation that either TRW would raise its offer or a rival would trump Northrop’s bid.

Analysts have speculated that Boeing and Lockheed Martin (NYSE:LMT – news) were best positioned to step in with rival offers.

Shares in Los Angeles-based Northrop were trading down $2.95, or 2.7 percent, at $104.80 on the New York Stock Exchange. At this price, Northrop would have to offer 0.4485 of its shares for each TRW share.

Northrop said it was going straight to shareholders on Monday after not receiving a “substantive response” from TRW’s board, which last week informed Northrop it needed more time to review the bid.

“Accordingly, we are moving ahead to make this offer available to TRW shareholders and to initiate all the steps that are necessary to see it through to conclusion, including requesting that the TRW board of directors call the special meeting of shareholders required under Ohio law to authorize our acquisition of TRW shares,” Northrop Chairman and Chief Executive Kent Kresa said in a statement.

The company is also filing a lawsuit in Ohio challenging elements of the state’s anti-takeover laws, Northrop said.

Ohio’s takeover laws, designed to encourage negotiated mergers and protect home-grown companies, are generally considered to be among the most stringent in the country.

One of the statutes bars investors from buying large chunks of the company’s stocks—defined as being more than $250,000 worth or 0.5 percent—before

shareholders vote on the offer. The law, designed to deny merger arbitragers—who typically push management to sell—too much sway over the vote, strips such investors of their voting rights if they buy stock after the date the offer is first announced, Ohio regulators say.

In Northrop’s case, that means investors who bought big blocks of stock after the offer was unveiled on February 21 will not be able to vote at the

shareholder meeting. Companies pursuing hostile bids in Ohio, if successful, also face a three-year moratorium on selling off the target company’s assets to help pay down acquisition debt. It was not immediately clear which of Ohio’s anti-takeover laws Northrop was challenging.

Kresa said Northrop remains willing to enter friendly talks with TRW. He told a group of investors in New York last week Northrop was not averse to including

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