Northrop-TRW Merger Clears Key Hurdle
Northrop Grumman Corp. said Tuesday that it reached agreement with the Justice Department about its satellite business, thus clearing the way for its $7-billion purchase of TRW Inc. pending shareholders’ approval today.
The Century City-based defense contractor said it had agreed “on essential terms of a consent decree” with the federal agency that would assure that the Northrop-TRW merger would not impede “fair and open competition” in the electronic satellite payload business.
The Defense Department has already signed off on the deal and has been waiting for the Justice Department to complete its antitrust reviews. The European Union antitrust authorities approved the merger in October.
At issue for the Justice Department was whether Northrop would provide rival Lockheed Martin Corp. equitable access to sophisticated sensors that go on satellites. Lockheed makes the launch vehicles and the satellites but has been buying the sensors from Northrop and TRW.
Lockheed raised competition issues, arguing that since the combined company would make both the satellites and the sensors, Lockheed would be locked out of the market or have to pay a higher price for them.
The consent decree would leave Northrop with the possibility of sanctions if it were found to have engaged in unfair practices related to the sale of satellite components.
Northrop executives said the decree does not require the company to divest any businesses. “We are pleased to complete another significant milestone in our planned acquisition of TRW,” Chief Executive Kent Kresa said.
With the acquisition, Northrop would become the nation’s second-largest defense contractor. TRW and Northrop shareholders are expected to approve the deal during a special meeting in Cleveland and Santa Monica, completing Northrop’s transformation from a marginal defense firm in the early 1990s to a behemoth with interests in an array of Pentagon programs.
Northrop’s stock closed Tuesday at $96.62, up $1.27 on the New York Stock Exchange. TRW shares rose 91 cents, to $51.81, also on the NYSE.
