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General Dynamics’ Bid for Newport Questioned

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From Reuters

The senior U.S. senator from Mississippi questioned the cost savings predicted by General Dynamics Corp. in its $2.1-billion cash offer for warship builder Newport News Shipbuilding Inc. in a letter to U.S. Defense Department officials made public Tuesday.

Sen. Thad Cochran, a Republican, said it seemed “illogical” that the Pentagon would support General Dynamics’ bid because it would “create a monopoly in both nuclear and conventional shipbuilding,” while a hostile bid for Newport by Northrop Grumman Corp. would not.

Los Angeles-based Northrop, which has a large shipyard in Mississippi, in May launched a hostile takeover bid for Newport News, which makes nuclear-fueled aircraft carriers.

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Citing reports that the Pentagon was favorably inclined toward General Dynamics’ bid, Cochran asked Defense Undersecretary Pete Aldridge to explain what assurances General Dynamics had given that the Newport News merger could generate the projected $2 billion in savings over a 10-year period.

“It would be an abdication of responsibility to base approval of a monopoly on projected savings which cannot be credibly expected and verified,” Cochran said in a letter, dated Monday, to Aldridge.

Cochran said closing shipyards and laying off people were “not acceptable methods of achieving cost savings under antitrust guidelines, and if permitted, would only further damage our nation’s shipbuilding capability.”

On the New York Stock Exchange, General Dynamics shares fell 45 cents to close at $82.45 and Newport News rose 7 cents to $66.05.

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