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U.S. DoD CONTINUES NORTHROP REVIEW

21 Nov 02. The U.S. Defense Department is trying to resolve remaining issues involving defense contractor Northrop Grumman Corp.’s (NYSE:NOC – News) plan to buy rival TTRW Inc. (NYSE:TRW – News), a Pentagon spokesman said on Thursday.

Over the course of the agency’s review, “we have discovered issues of importance to us and we are working on these issues with the parties concerned and the Department of Justice,” said Defense Department spokesman Glenn Flood.

“Assuming those conditions can be successfully resolved we would then recommend that Justice approve the transaction,” he said. “The bottom line is the review continues.”

Flood declined to detail the issues regarding the deal to combine Northrop and TRW. The antitrust division at the Justice Department reviews whether mergers and acquisitions would harm competition. A Justice Department spokeswoman had no immediate comment.

The merger of the two, both of which are big U.S. suppliers of satellites and sensors had sparked competition worries from the biggest U.S. defense contractor, Lockheed Martin Corp (NYSE:LMT – News), but defense officials this summer said they saw no major obstacles to its ultimate approval. Northrop and TRW have set Dec. 11 shareholder votes and Northrop has said it expects to close the deal by the end of the year and Northrop has said it expects to close the deal by the end of the year.

“We’ve been working with the Pentagon and Department of Justice for months to find ways to ameliorate any concerns,” said Jay McCaffrey, director of external communications at TRW.

“We believe that they are fully informed and that no serious issues exist,” he said. “Further we do not anticipate any issue preventing our merger from closing in the fourth quarter.”

A spokesman for Northrop was not immediately available for comment. The 30-day waiting period that followed the Department of Justice’s second request of information under the Hart-Scott-Rodino Anti-Trust Improvements Act has already expired. But Northrop said it has agreed with the DOJ not to close the acquisition without giving regulators at least 10 business days notice before shareholders vote.

On November 19, tt the close of the TRW automotive sale to Blackstone, Northrop expected in the first quarter, Northrop’s equity interest in the division is expected to be about 20%, which would increase the total cash consideration in the deal to $3.9bn to $4bn. Cash proceeds from the sale, along with the proceeds already received from the completed sale of TRW Aeronautical Systems, will be used to pay down debt, Northrop said.

Earlier on Thursday, Northrop said it expected the TRW acquisition to boost its 2003 sales to as much as $26bn.

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