Northrop Agrees to Buy Logicon for $750 Million
Northrop Grumman Corp. announced Monday that it will buy Torrance-based Logicon Inc., which provides advanced information and training systems for the military and corporations, in a stock swap valued at roughly $750 million.
The merger would give Northrop Grumman’s modest information technology operation the potential to be a key contender in this rapidly growing segment of the defense industry, where companies battle to make weapons smarter and warriors better trained.
“The merger with Logicon is yet another step in the evolution of Northrop Grumman in the post-Cold War defense environment,” said Kent Kresa, Northrop Grumman’s chairman, chief executive and president.
Logicon shares leaped 23% on the news, rising $9.375 to close at $49.75 on the New York Stock Exchange. Northrop Grumman shares slipped $2.50 to $84.50 on the NYSE.
“It sounds like a pretty good deal,” said Peter Aseritis, an analyst with Credit Suisse First Boston in New York. “In the near term, it brings them into critical mass in the information technology area.”
The electronics and information systems side of the defense business has been growing rapidly because purchasers are demanding the latest in high-tech gadgets for planes, tanks and weapons.
At the same time, acquisitions are shrinking the number of players in the defense information technology business, forcing smaller companies to merge or shut down.
This latest transaction will create an operation with revenue near $1 billion, the firms said. The company, to be called Logicon Information Technology Division, would be based in Torrance and headed by Logicon Chief Executive Jack Woodhull.
Logicon, with $560 million in revenue and more than 5,000 employees at more than 100 locations, is a well-respected name in its rather esoteric field.
The company creates software and other products to help the military and private industry manage information and train personnel, among other things.
Logicon has a contract with the U.S. Army that takes senior commanders and staff members and puts them through a round-the-clock computerized battle simulation called “Warfighter.” Another Logicon product is used to link the computer systems of federal, state and local law enforcement agencies so they can better gather information on criminal activity.
The merger would probably result in some job losses, but “we don’t see any major layoffs,” a Northrop Grumman spokesman said. Logicon employs about 700 people in Southern California.
Under the agreement, Logicon stockholders would receive a fraction of a Northrop Grumman share that has yet to be decided. The size of the fraction would be determined by dividing $52 by the average closing price of Northrop Grumman’s common stock during a 30-day trading period before the proxy statement is mailed. (Northrop Grumman used a reference price of $83.50.)
The range would be no more than 0.6919 and no less than 0.5661. At the approximate midpoint of 0.62, Logicon’s 14.4 million shares outstanding would be valued at about $745.5 million.
The deal, which must be reviewed by government regulators and approved by Logicon shareholders, is expected to close in about 60 days.
