Northrop Grumman makes unsolicited bid for TRW Inc.

Defense contracting giant Northrop Grumman announced Friday it is making a $5.9 billion unsolicited bid for rival systems integration firm TRW Inc. of Cleveland, according to a prepared statement by Chairman and Chief Executive Officer Kent Kresa. The Los Angeles-based company hopes to continue a streak of major acquisitions it has used to solidify the firm's position in the federal information technology market. Northrop Grumman has aggressively acquired firms over the past year. In 2001 it bought defense contractors Litton Industries and Newport News Shipbuilding. It also branded its technology business under a new name, "Northrop Grumman Information Technology," to strengthen its standing in the government market. "We believe the strategic combination of Northrop Grumman and TRW will provide tremendous value to the shareholders of both companies," Kresa said. "Northrop Grumman's electronics and systems integration capabilities, combined with TRW's space and systems expertise, would create a strong contributor to the nation's satellite and missile defense requirements." Kresa added that the merger, which he predicted would be completed by the third quarter of this year if the TRW board of directors agrees to it, would enhance Northrop Grumman's information technology business. Northrop Grumman is one of the largest information technology contractors in the federal market, with annual sales of nearly $4 billion in fiscal 2001. TRW ranks much further behind in market share, but still holds a seat among the top 10 technology vendors. Northrop Grumman President and Chief Operation Officer Ronald Sugar said, "With the integration of our 2001 acquisitions largely behind us, we are confident that our management, in conjunction with the leadership of TRW, can quickly and successfully integrate the defense and aerospace businesses of Northrop Grumman and TRW." Northrop Grumman would sell off TRW's automotive business, which accounts for 60 percent of the company's total sales. Northrop Grumman predicted 2003 sales of $26 to $27 billion if the merger takes place. The company would exchange $47 in stock for each TRW share. TRW's stock closed at $39.80 per share Thursday on the New York Stock Exchange. In a statement Friday, TRW said, "[The company] finds it regrettable that Northrop Grumman has chosen to make this proposal immediately following the unexpected departure of its former chief executive officer, David Cote." Cote stunned TRW and Wall Street analysts when he announced his resignation on Tuesday after little more than a year with the firm. Cote has taken a position as president and chief executive officer of Honeywell International Inc. of Morristown, N.J.