Northrop Grumman's hostile bid for TRW could spark an aerospace takeover war as other exhibitors present at Asian Aerospace join the fray.
US defence contractor Northrop Grumman launched its $5.9 billion hostile bid for TRW last Friday in an effort to add satellite and missile-control systems to its portfolio.
Northrop Grumman chief executive Kent Kresa has requested a response from TRW to its offer by the close of business tomorrow, but TRW has advised shareholders not to take immediate action. Its board is due to meet to consider its formal response to the offer.
TRW's stock soared 26% at the close on Friday after the news broke, making the bid look low.
This has increased speculation that other bidders including Honeywell, Lockheed Martin, Goodrich, Boeing or General Dynamics might join the bidding. Northrop could even increase its offer or TRW could sell off its aerospace business to clear its debt.
The UK's Financial Times reports that shareholders expect TRW to reject Northrop's proposal.
It also says Wall Street bankers suggest the company may choose to put itself up for sale, seeking separate bidders for its automotive and aerospace divisions.
The bid comes as the Bush administration backs a new wave of "Son of Star Wars" defence weaponry.
TRW is well placed to develop the hi-tech systems needed to command and control missile interceptors and has an active programme to develop next-generation chemical lasers.
Regrettable
TRW says the bid is "regrettable", coming after its share price fell sharply on news just three days earlier that former chief executive David Cote had unexpectedly quit to join Honeywell.
The fall was blamed partly on TRW's announcement that it might take "four to six months" to find his successor.
Honeywell refuses to comment on rumours and speculation, but says Cote's move has "no connection" to Northrop's bid for TRW.
Northrop has been acquisitive of late, buying Litton Industries and Newport News Shipbuilding, making it one of the US Navy's key suppliers.
If successful, this merger would create a company with projected revenues for 2003 of $26-$27 billion, making it a challenger to Boeing as the second largest US defence contractor. TRW's has a debt of just under $5 billion, which makes Northrop's offer actually worth about $11 billion. Northrop suggests that, if its takeover succeeded, it would dispose of the TRW auto business.
A Northrop Grumman spokesperson at the show says: "We think TRW is a good fit with Northrop Grumman and a great opportunity for both organisations. Certain parts of the TRW business would be very beneficial to us."
In a letter to TRW's board, Kresa says the marriage would create "a strong contributor to the nation's satellite and missile defence requirements".
Source: Flight Daily News
