Northrop
Grumman Corporation (NYSE: NOC) and TRW Inc. (NYSE: TRW) jointly announced
that they have entered into a definitive merger agreement. The combination
will position Northrop Grumman as the nation’s second largest defense
contractor with projected annual revenues of more than $26 billion and
approximately 123,000 employees. Following the separation of TRW’s automotive
business and completion of the sale of TRW’s Aeronautical Systems business,
Northrop Grumman will be a Fortune 100 company.
Under the terms of the agreement, unanimously approved by the boards of
directors of both companies, Northrop Grumman will acquire TRW for $60 per
share in common stock in a transaction valued at approximately $7.8 billion,
plus the assumption of TRW’s net debt at the time of closing.
The exact exchange ratio will be determined by dividing $60 by the average
of the reported closing sale prices per share of Northrop Grumman common stock
on the New York Stock Exchange for the five consecutive trading days ending on
and including the second trading day prior to the closing of the merger. The
exchange ratio will not be less than 0.4348 or more than 0.5357 of a Northrop
Grumman share.
After completion of the merger, Northrop Grumman plans to separate TRW’s
automotive business, either through a sale or a spin-off of the business to
shareholders. TRW’s previously announced agreement to sell its Aeronautical
Systems business to Goodrich Corporation for $1.5 billion will remain
unaffected by today’s announcement.
Kent Kresa, chairman and chief executive officer of Northrop Grumman,
said, “Today is a great day for Northrop Grumman and TRW. We’re bringing
together the superior technology and outstanding talent of two of our nation’s
premier defense companies, creating a powerful and highly competitive
enterprise with excellent growth prospects. Today’s acquisition adds the last
critical node of space to our robust and well-diversified defense platform and
systems capabilities that operate on the ground, at sea and in the air. We
believe this transaction provides tremendous value to our shareholders,
employees and customers.
“When we first proposed to acquire TRW, we stated that we were prepared to
pay full and fair value for the company, subject to a comprehensive due
diligence process. Our thorough due diligence made clear to us the strength
and value of TRW’s operations and the tremendous opportunities for the
combined defense enterprise,” said Kresa.
“The talents and creative energies of TRW’s defense industry employees are
among the company’s greatest strengths and we look forward to welcoming them
to the Northrop Grumman family. Following the completion of the transaction,
we will seamlessly transition the defense businesses into the company as was
done recently with Litton and Newport News,” concluded Kresa.
Philip A. Odeen, chairman of TRW, said, “This is a real win for TRW
shareholders. For the past several months, TRW’s board has undertaken a
comprehensive strategic review with the sole objective of enhancing
shareholder value. This transaction achieves that objective. We have said
from the start that this was all about shareholder value and this transaction
delivers to our shareholders full value from their TRW investment. In
addition to receiving a premium on their investment, TRW shareholders also
have the opportunity to participate in the upside potential created by the
combination of these two great businesses. Together, our companies will
create a true industry powerhouse with an unparalleled portfolio of premier
technologies, expertise and capabilities.”
Northrop Grumman Confirms 2002 Guidance; Provides 2003 Guidance
In addition to confirming 2002 economic earnings per share guidance of
$6.60 to $7.10, Northrop Grumman said that with the acquisition of TRW, the
company expects 2003 economic earnings to be in the range of $7.75 to
$8.30 per share and GAAP earnings of $6.00 to $6.55 per share, with
double-digit growth again expected in both economic and GAAP earnings in 2004.
Prior to the B-2 related tax payment, the company expects cash from operations
in 2003 to be approximately $1.25 billion, and to average well over $2 billion
per year for the next several years thereafter. Including the effects of this
transaction and the company’s B-2 program tax payment, Northrop Grumman
expects to have a debt to capitalization ratio at year-end 2003 near or below
the low end of its 30 percent to 40 percent target range.
Following the close of the transaction, TRW’s defense business, similar to
the Litton and Newport News businesses, will be initially operated as a
separate Northrop Grumman sector, reporting to the office of the chairman.
Northrop Grumman will work to quickly integrate the operations of TRW’s
defense business operations. Northrop Grumman foresees little change in
employment levels in the defense business as a result of this transaction.
The transaction is subject to the approval of shareholders of both
companies and to review under the Hart-Scott-Rodino Act as well as other
governmental and regulatory agencies in the U.S. and Europe. The companies
expect to complete the transaction in the fourth quarter of 2002.
As a result of the definitive merger agreement, Northrop Grumman did not
extend its exchange offer for all outstanding shares of common and preferred
stock of TRW Inc., which expired at midnight EDT on Friday June 28, 2002, and
will not accept any shares tendered. Northrop Grumman expects to amend its
current Form S-4 registration statement shortly.
Salomon Smith Barney and Stephens Financial Group acted as financial
advisors to Northrop Grumman. Goldman, Sachs & Co and Credit Suisse First
Boston advised TRW.
Investor Meeting and Press Conference
Northrop Grumman’s and TRW’s senior management will conduct an investment
community meeting at The New York Palace Hotel, Reid Salon Room, at
10 a.m. EDT. The call-in number is (703) 871-3022 and the conference ID# is
2034115. The meeting will be webcast live on the Internet at
www.northropgrumman.com and at www.trw.com
A press conference will also be held today with Northrop Grumman’s and
TRW’s senior management at The New York Palace Hotel’s Fahnestock Room at
11 a.m. EDT. The call-in number for the press conference is (303) 267-1000
and the conference ID# is 2034127.
About Northrop Grumman and TRW
TRW Inc. provides advanced technology products and services for the
automotive, aerospace and systems markets. The company had year-end 2001
sales of $16.4 billion. For more information, visit www.trw.com .
Northrop Grumman Corporation is an $18 billion, global defense company
with its worldwide headquarters in Los Angeles. Northrop Grumman provides
technologically advanced, innovative products, services and solutions in
defense and commercial electronics, systems integration, information
technology and nuclear and non-nuclear shipbuilding and systems. With nearly
100,000 employees and operations in 44 states and 25 countries, Northrop
Grumman serves U.S. and international military, government and commercial
customers.
Note: Certain statements and assumptions in this release contain or are
based on “forward-looking” information (that Northrop Grumman believes to be
within the definition in the Private Securities Litigation Reform Act of 1995)
and involve risks and uncertainties. Such “forward-looking” information
includes, among other things, the statements above as to the impact of the
proposed acquisition on revenues and earnings. Such statements are subject to
numerous assumptions and uncertainties, many of which are outside Northrop
Grumman’s control. These include completion of the merger, governmental
regulatory processes, Northrop Grumman’s ability to successfully integrate the
operations of TRW, achieve a successful transaction or other resolution with
respect to the TRW automotive sector, assumptions with respect to future
revenues, expected program performance and cash flows, the outcome of
contingencies including litigation, environmental remediation, divestitures of
businesses, and anticipated costs of capital investments. Northrop Grumman’s
operations are subject to various additional risks and uncertainties resulting
from its position as a supplier, either directly or as subcontractor or team
member, to the U.S. Government and its agencies as well as to foreign
governments and agencies; actual outcomes are dependent upon factors,
including, without limitation, Northrop Grumman’s successful performance of
internal plans; government customers’ budgetary restraints; customer changes
in short-range and long-range plans; domestic and international competition in
both the defense and commercial areas; product performance; continued
development and acceptance of new products; performance issues with key
suppliers and subcontractors; government import and export policies;
acquisition or termination of government contracts; the outcome of political
and legal processes; legal, financial, and governmental risks related to
international transactions and global needs for military aircraft, military
and civilian electronic systems and support, information technology; naval
vessels, space systems and related technologies, as well as other economic,
political and technological risks and uncertainties and other risk factors set
out in Northrop Grumman’s filings from time to time with the Securities and
Exchange Commission, including, without limitation, Northrop Grumman reports
on Form 10-K and Form 10-Q.
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell shares of TRW or Northrop Grumman. Northrop Grumman and TRW
will file and deliver all forms, proxy statements, notices and documents
required under state and federal law with respect to this merger.
Northrop Grumman Corporation filed a registration statement on Form S-4
(File No. 333-83672) with the Securities and Exchange Commission on March 4,
2002 with respect to its offer to exchange all outstanding shares of TRW
capital stock for Northrop Grumman stock. The Registration Statement will be
amended shortly to include a joint proxy statement/prospectus relating to the
proposed merger of Northrop Grumman and TRW Inc. The directors, certain
executive officers and other employees and representatives of Northrop Grumman
and TRW Inc. may be deemed to be participants in the solicitation of proxies
for the shareholders meeting relating to the proposed merger. The joint proxy
statement/prospectus will contain important information regarding such
potential participants and other important matters which should be read by
Northrop Grumman and TRW shareholders before making any decisions regarding
the merger. Copies of joint proxy statement/prospectus, and any amendments or
supplements thereto, may be obtained without charge at the SEC’s website at
www.sec.gov as they become available.
Note: With respect to TRW: This press release contains certain
“forward-looking statements” that TRW believes are within the meaning of the
Private Securities Litigation Reform Act of 1995. However, TRW shareholders
should be aware that the preparation of any forward-looking statements
requires the use of estimates of future revenues, expenses, activity levels
and economic and market conditions, many of which are outside of TRW’s
control. Further, TRW’s results could be affected by the ability to obtain
new contract awards; the level of defense funding by the government and
determination of existing government contracts; pricing pressures from
customers; moderation or decline in the automobile build rate; changes in
consumers debt levels; work stoppages; unanticipated downturn in the financial
condition of, or business relationships with customers and suppliers; the
ability to reduce the level of outstanding debt from cash flow from operations
and the proceeds from asset dispositions; a credit rating downgrade; increase
in interest rates; customer recall and warranty claims; product liability and
litigation issues; changes to the regulatory environment regarding automotive
safety; the introduction of competing products or technology by competitors;
the ability to attract and retain skilled employees with high-level technical
competencies; the financial results of companies in which we have made
technology investments; the ability of funding for research and development;
economic, regulatory and political domestic and international conditions;
fluctuations in currency exchange rates; and the impact of additional
terrorist attacks, which could result in reduced automotive production,
disruptions to the transportation system, or significant and prolonged
disruption to air travel. In addition, there can be no assurance: regarding
the completion of the merger, the receipt of necessary government approvals,
or the completion of the sale of the aeronautical systems business. Other
factors and assumptions not identified above are also involved in the
preparation of forward-looking statements, and the failure of such factors and
assumptions to be realized may also cause actual results to differ materially
from those discussed. TRW assumes no obligation to update such estimates to
reflect actual results, changes in assumptions or changes in other factors
affecting such estimates other than as required by law.
The directors and certain executive officers of TRW may be deemed to be
participants in the solicitation of proxies from shareholders of TRW in
connection with TRW’s special meeting of shareholders to consider the
Agreement and Plan of Merger, dated as of June 30, 2002, with Northrop
Grumman. Information concerning such participants will be contained in a
Form 8-K to be filed by TRW with the Securities and Exchange Commission.
This press release relates to the Agreement and Plan of Merger with
Northrop Grumman. Shareholders of TRW are advised to read TRW’s PROXY
STATEMENT FOR THE SPECIAL MEETING IN CONNECTION WITH THE AGREEMENT AND PLAN OF
MERGER WHEN IT BECOMES AVAILABLE, BECAUSE IT CONTAINS IMPORTANT INFORMATION.
Shareholders of TRW and other interested parties may obtain, upon filing, free
of charge, copies of TRW’s proxy statement and other documents filed by TRW
with the SEC at the SEC’s internet website at www.sec.gov . Each of these
documents may also be obtained free of charge by calling investor relations at
TRW at (216) 291-7506.
NORTHROP GRUMMAN PROFILE
Areas of Expertise
-- Airborne and Ground-Based Radar
-- Airborne Countermeasures
-- Airborne Surveillance
-- Component Technologies
-- Electronic Warfare
-- Information Technology & Services
-- Marine and Underseas Systems
-- Military Aircraft Systems
-- Nuclear and Non-Nuclear Ship Building
-- Precision Strike Systems
-- Space Systems
Vital Statistics
Stock Ticker Symbol: NOC -- Traded on the New York Stock Exchange
Market Capitalization: $14.1 billion as of 6/28/02
Employment: Approximately 100,000
Locations: The company has operations in 44 states and
25 countries.
Defense Industry Ranking: Northrop Grumman is America's third largest
contractor in defense/federal markets.
Corporate Structure
Northrop Grumman operates through six business sectors:
-- Electronic Systems, based in Baltimore, MD
Annual revenues of approximately $5 billion -- 23,000 employees
-- Integrated Systems, based in Dallas, TX
Annual revenues of approximately $3 billion -- 12,000 employees
-- Information Technology, based in Herndon, VA
Annual revenues of approximately $4 billion -- 23,000 employees
-- Ship Systems, based in Pascagoula, MS
Annual revenues of approximately $2 billion -- 17,000 employees
-- Newport News, based in Newport News, VA
Annual revenues of approximately $2.5 billion -- 17,800 employees
-- Component Technologies, based in Florham Park, NJ
Annual revenues of approximately $600 million -- 5,000 employees
Recent Major Contract Wins
Joint Strike Fighter (F-35) -- Northrop Grumman is a principal member of
the Lockheed Martin team selected to build the next-generation fighter
for all three U.S. military services and the British Royal Air Force and
Royal Navy. The company expects about $4 billion in revenues during the
development phase of this program.
DD(X) -- This $2.9 billion, four-year program will produce designs for
the next-generation, transformational surface combatants for the
U.S. Navy.
Deepwater -- Northrop Grumman is an equal partner on this $11 billion
program that will modernize the U.S. Coast Guard's fleet and aircraft
over the next 20 years.
SSES -- The company's Information Technology sector has been selected by
the U.S. Army to provide software and systems engineering support to the
service's Communications-Electronics Command. The program has a
potential value of $702 million during the five base years of the
contract.
USS Enterprise Support -- The U.S. Navy has awarded the company a
$191 million contract for an Extended Drydock Selected Restricted
Availability on the aircraft carrier USS Enterprise.
TRW PROFILE
Areas of Expertise
-- Aeronautical Systems
-- Avionics Systems
-- C4ISR
-- Cargo Systems
-- Chassis Systems
-- Engine Components
-- Flight Controls
-- High-Energy Lasers
-- Information Technology & Services
-- Microelectronics
-- Missile Defense
-- Occupant Safety Systems
-- Power Generation
Vital Statistics
Stock Ticker Symbol: TRW
Market Capitalization: $6.9 billion as of 6/28/02
Employment: Approximately 93,300
Locations: The company has operations in 26 states and
25 countries.
Defense Industry Ranking: 8th on Pentagon's list of top companies
according to net value of prime contracts
Corporate Structure
TRW operates through four business sectors:
-- Automotive, based in Livonia, Michigan
Annual revenues of $10.1 billion -- 64,000 employees
-- Systems, based in Reston, Virginia
Annual revenues of $3.2 billion -- 14,300 employees
-- Space and Electronics, based in Redondo Beach, Calif.
Annual revenues of $2 billion -- 8,700 employees
-- Aeronautical Systems, based in Solihull, England
Annual revenues of $1.1 billion -- 6,300 employees
Recent Major Contract Wins
ITS -- The U.S. Air Force has selected TRW as one of the awardees for the
Information Technology Services contract, which will provide IT services
to the Air Force, Department of Defense and civilian federal agencies.
The five-year contract has an estimated value of $650 million, with a
total potential value of $1 billion if fully used.
JTRS -- TRW is a member of a team led by The Boeing Company selected by
the U.S. Army to develop the Joint Tactical Radio System (JTRS), the
first radio communications system designed for use by all U.S. forces.
SBIRS Low -- TRW has been named prime contractor of a combined team for
the Department of Defense's missile tracking Space-Based Infrared System
Low (SBIRS Low) program, under a new agreement reached with the Dod's
Missile Defense Agency.
GTN 21 -- TRW has been selected to compete in the first phase of the
Global Transportation Network 21 contract, which will improve defense
transportation command and control. The contract has a total potential
value of $337 million.
