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4 Jun 02. Northrop Grumman (NYSE:NOC – News) is set to take a stake of almost 20 percent in German submarine maker Howaldtswerke-Deutsche Werft AG (HDW), business daily Handelsblatt said on Tuesday.

Handelsblatt said the U.S. company would buy the stake from German engineering group Babcock Borsig (XETRA:BBXG.DE – News) which holds 25 percent of HDW, the world’s biggest manufacturer of conventional submarines, and would seal the deal as early as Tuesday.

The Northrop deal follows an agreement in March by Babcock, tourism group Preussag (XETRA:PRSG.DE – News) and a financial investor to sell a 75 percent stake in HDW to One Equity, a unit of Chicago-based One Corp (NYSE:ONE – News). The HDW sale has been hit by controversy about the possible transferoverseas of silent diesel technology in which the German yard leads the world, although Chancellor Gerhard Schroeder said on Monday the government would not allow the sale to circumvent its ban on exporting state-of-the-art defense technology to Taiwan.

Northrop is considered a prime candidate to fulfill President Bush’s promise to supply Taiwan with non-nuclear submarines as part of shoring up the island’s defenses against China.

Comment: Although Chancellor Schroeder’s statement appears to ally fears of technology transfer for the Taiwanese contract, the HDW technology would form a vital element to any successful Northrop bid for the Taiwan contract

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