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NORTHROP UPS TRW OFFER TO $6.7BN

15 Apr 02. Defense contractor Northrop Grumman Corp. increased its bid to acquire TRW Inc. to $6.7bn, a month after the defense manufacturer’s board rejected an unsolicited offer of $5.9 billion.

Kent Kresa, chairman and chief executive of Los Angeles-based Northrop Grumman, said TRW is more valuable because of improving economic conditions. The new offer is valued at $53 a share, compared with an original offer of $47 a share.

Late on Sunday TRW advised its shareholders in a statement to take no action and said its board would review the revised offer.

Northrop issued the following statement in response to the April 15th ruling by the United States District Court in the Northern District of Ohio. Kent Kresa, chairman and chief executive officer of Northrop Grumman, said that he was “pleased that the Court recognized the seriousness of the company’s constitutional challenge to Ohio’s anti-takeover statutes.” He added that the opinion “underscores the importance of the upcoming vote at the April 22, 2002, special meeting of shareholders.”

The Court’s ruling, while denying the immediate relief sought by Northrop Grumman with respect to Ohio’s anti-takeover laws, reserved ruling on the merits of the issues raised by the company until after the TRW Special Meeting. The Court observed that “the magnitude of the issues presented counsels the Court to take a more deliberate and thoughtful course and to delay ruling on the merits of the plaintiff’s claims until after the special meeting of TRW’s shareholders.” The Court decided that an immediate decision on the constitutional and other issues was not necessary, even though, as the Court explained, its “ultimate ruling may alter which shares are ‘interested shares”” and thereby ineligible to vote at the special meeting. The Court also based its conclusion on TRW’s warranty that “all proxies voted at the meeting will be maintained and, if necessary, may be re-tallied in short order.” Finally, in the Court’s view, “If the ‘disinterested’ shareholders vote to approve the transaction, the issue of the Control Share Acquisition Act’s constitutional validity becomes moot.

”Last month, TRW chairman Phillip Odeen told investors that $47 a share wasn’t indicative of TRW’s value. The TRW board also urged shareholders to reject the Northrop Grumman’s hostile tender offer.
Shares of TRW were up 49 cents to close at $51.97 in trading Friday on the New York Stock Exchange. Northrop shares lost 57 cents to close at $118.31.
“We strongly encourage TRW shareholders to send a strong message to their board of directors in favor of inviting us to conduct due diligence,” Kresa said in a news release Sunday. “If the TRW board continues to deny us access, this offer will not proceed.”
In response to the takeover attempt, TRW said last month it plans to spin off its automotive parts business within nine months. TRW said it was in preliminary talks with others who have expressed interest in buying all or part of the automotive business and its aeronautical systems business.

The automotive business—best known for air bags, seat belts and sensors—accounts for 64 percent of the company’s sales and 58 percent of profit. TRW’s space and defense business—the takeover target—had sales of $5.2 billion last year. Kresa has said Northrop Grumman would spin off or sell the automotive portion after a merger.

As we said in BATTLESPACE UPDATE (Vol.4 ISSUE 8 March 2nd 2002), ‘some observers suggested that the company was better valued at a price of as much as $79 per share and that Northrop would have to up its bid and/or face a counter bid from either General Dynamics or Boeing.’ The likelihood now is that although $79 may be top price for the bid t

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