Grumman Bid by Northrop Came Up Short : Aerospace: The offer was turned aside in favor of Martin Marietta’s, SEC filing shows. The pressure is on Northrop to make an acquisition.

Northrop Corp., again trying to ride the merger wave in the defense industry, offered to buy Grumman Corp. for $1.73 billion but was outbid by Martin Marietta Corp., Grumman told the Securities and Exchange Commission on Wednesday.

After months of negotiations, Northrop made an offer of at least $50 a share last month, Grumman said in a filing with the SEC. However, Grumman turned aside the Northrop bid in favor of a $55-a-share offer from Martin Marietta, a deal that was announced earlier this week.

Based in Los Angeles, Northrop is at a critical juncture in its venerable history, which includes development of the F-5 jet fighter, the T-38 Air Force trainer and the B-2 stealth bomber.

Analysts believe Northrop itself is a candidate to be acquired if it does not succeed in acquisitions of its own. Northrop knows that, and at least three times in recent years it has tried but failed to buy a major defense operation.

In the case of Grumman, Northrop said it might be willing to pay more than $50 a share, the SEC filing said. But analysts doubt that Northrop will raise the stakes.

Northrop Chairman Kent Kresa is adamant about not paying too much for an acquisition, they noted, and unwelcome takeovers are rare in the defense industry.

“I don’t think Kresa is the kind of person who would go for a hostile bid,” said Paul Nisbet, an analyst at the consulting firm JSA Research Inc. in Newport, R.I.

However, Grumman’s stock climbed as high as $55.25 a share Wednesday before closing at $55, up 75 cents, in New York Stock Exchange trading, indicating that at least some investors expect a higher bid--from Northrop or some other suitor. Northrop’s stock, meanwhile, slipped 50 cents to $40.625 a share, also on the NYSE.

The Pentagon is encouraging the industry’s consolidation as the best response to the nation’s shrinking defense budgets, which means the Defense Department might not object to a takeover fight for Grumman, said Wolfgang Demisch of BT Securities Corp.

Although Northrop declined to comment on its plans, the company remains under pressure to complete a merger quickly or risk becoming an also-ran in the winnowing defense field and an inviting asset for one of its bigger rivals to buy, analysts said.

“They’re in danger of becoming a target,” said Gary J. Reich of Prudential Securities.

Here is Northrop’s dilemma: The consolidation swirling around the company is fast leaving the industry dominated by a handful of giant firms with annual sales of $10 billion or more each. The titans include Martin, McDonnell Douglas Corp. and Lockheed Corp.

Northrop’s sales were $5.1 billion last year. Moreover, its sales are expected to drop by about a third in coming years unless the company buys something or wins a major new award.

Its leading program, the B-2, is scheduled to end in the late 1990s when the company finishes building the 20 bombers ordered by the Air Force. Northrop has said the program’s end could cut its annual sales to between $3 billion and $4 billion.

The company also makes missiles, defense electronics and parts for McDonnell’s F/A-18 jet fighter and Boeing’s 747 passenger jet.

While failing to make a major acquisition, Northrop has made solid financial progress in recent years.

Although its 1993 profit fell to $96 million from $121 million the previous year, owing to losses on the development of a new stealth missile, Northrop has been generating enough cash to reduce its long-term debt to $160 million from $690 million three years ago.

The company has slashed its work force to 29,000 from 48,000 six years ago and taken other cost-cutting steps. And it expects to keep generating large amounts of cash that could help finance a merger.

Kresa, 55, has previously said he won’t be pressured into launching a merger that doesn’t make “strategic sense.” He’s also said that if Northrop can’t find a sound deal, it is willing to become a smaller company and return its excess cash to stockholders.

But lately, Northrop has clearly been looking to buy.

It tried to buy IBM’s Federal Systems division earlier this year but was outbid by Loral Corp.’s $1.5-billion offer. It also sought General Dynamics’ F-16 fighter jet line, but Lockheed won that derby a year ago with a $1.5-billion bid.

In the end, Northrop may itself be willing to be swallowed up--but only if the price is right.

“If someone wants to make his (Kresa’s) shareholders rich at a fair price, I think the man has the intestinal fortitude that he will accept,” analyst Demisch said.

But according to Prudential’s Reich, Northrop won’t be acquired simply because it is becoming a secondary player and is ripe for picking. Any suitor will want Northrop’s operations to complement its own, he said.

“Somebody has to feel that two plus two equals five,” Reich said.