Grumman Cool to Northrop’s Revised Bid for Takeover : Defense: Its directors reject increased offer, stating they will stick with the sealed auction. Deadline is today.

Northrop Corp., launching a preemptive strike in hopes of giving itself quick victory in the takeover fight for Grumman Corp., Wednesday offered to boost its bid to $62 a share from $60--provided Grumman accepted within 24 hours.

But Grumman’s directors appeared to reject the new bid, although the company’s largest shareholder endorsed the higher offer.

Indeed, after the flurry of exchanges between the companies on Wednesday, the two-way battle to buy Grumman had not changed much by the end of the day--except for Northrop’s indication to boost its price slightly. Yet, the battle may only get more complicated today.

Northrop’s $2.11-billion proposal came on the eve of today’s Grumman-imposed deadline for Northrop and its rival bidder, Martin Marietta Corp., to make their final offers to buy the Bethpage, N.Y.-based defense company in a sealed bidding contest.

But Los Angeles-based Northrop has objected to the sealed auction because its existing offer already is $5-a-share higher than Martin Marietta’s bid of $55 a share, or $1.93 billion.

Northrop said its brief offer to pay $62 a share was meant to “demonstrate our commitment to an open bidding process,” but added that if Grumman did not embrace the new offer by noon PST today, Northrop would revert to its existing bid of $60 a share, or $2.04 billion.

Grumman Chairman Renso L. Caporali, in a letter to Northrop Chairman Kent Kresa, said Grumman’s directors elected Wednesday night to stick with the sealed auction. Martin Marietta, meanwhile, remained silent about its plans.

Grumman now will have to see if Northrop and Martin Marietta are willing to submit private bids by 2 p.m. PST today, as Grumman requested. But there has been widespread speculation that Northrop will ignore the auction and wait to see if Martin Marietta makes a counteroffer. There was also speculation that Martin Marietta might simply walk away.

Wall Street still sees the bidding going higher. Grumman’s stock closed at $63.875 a share, up 50 cents, in New York Stock Exchange composite trading. Northrop’s stock was unchanged at $40.875 a share, and Martin Marietta slipped 12.5 cents to $45.

Caporali did not mention the $62-a-share price specifically in his letter, and Grumman officials would not comment. But the letter strongly indicated that Grumman would weigh that price only if Northrop submitted it through Grumman’s auction.

However, the adviser to Grumman’s largest stockholder--a Grumman employee trust fund that owns 33% of Grumman--endorsed Northrop’s bid of $62 a share. The adviser, Wilbur Ross, a senior managing director of Rothschild Inc., said Grumman should get Martin Marietta to at least match that price.

Noting that Northrop’s bid represented $70 million more for Grumman’s stockholders, Ross said: “We don’t think its appropriate to gamble that away on a hope and prayer that Martin Marietta will bid more.”

Regardless, Northrop said, “We’re sorry that Grumman’s board elected not to have an open, public bidding process for their shareholders. We’re continuing to review our options.”

The fight for Grumman, a former maker of Navy fighter jets that now mainly builds surveillance gear and other defense electronics, is the current focal point of the consolidation in the defense industry that stems from the post-Cold War slide in military spending.

Northrop, maker of the B-2 stealth bomber, is particularly anxious to buy Grumman in order to avoid being acquired itself amid an industry rush to consolidate. Martin Marietta, one of the nation’s biggest defense contractors, also has been one its most active buyers.

Because it is widely believed Northrop is going to sit out Grumman’s auction and wait for Martin Marietta’s next step, Northrop’s decision to put $62 a share on the table, if only briefly, left some analysts wondering about its strategy.

“I don’t understand it,” said Cai von Rumohr, an analyst at the securities firm Cowen & Co. in Boston. “They had a bid that already was the highest. I don’t see why they needed to go to $62.”

Paul Nisbet, an analyst at the aerospace consulting firm JSA Research Inc. in Newport, R.I., said that although Northrop’s action seemed intended to get Grumman’s board to take immediate action, “I think Grumman will let it pass.”

Adding to the confusion was that Northrop gave Grumman’s board a deadline to respond to its new offer that’s two hours before Grumman’s auction deadline today. So, even if Grumman’s board does indeed snub Northrop’s proposal, Northrop will still have two hours to submit that bid, or another one, under Grumman’s sealed bidding procedure.