Northrop May Sign Consent Decree

Hoping to speed up regulatory approval of its proposed $7.8-billion purchase of TRW Inc., Northrop Grumman Corp. has been talking to the Justice Department about signing a consent decree that would satisfy a key anti-competitive concern with the merger, a source close to the talks said Friday.

Top Pentagon officials tentatively have signed off on the deal, but the Justice Department has expressed concerns that the merger could hurt competition in the lucrative military satellite business, mainly based on complaints raised by Lockheed Martin Corp. earlier this year.

Unlike Boeing Co. and TRW, which make spacecraft and components, Lockheed relies heavily on suppliers for communications and sensor systems that go into its satellites. Among the suppliers Lockheed buys from are TRW and Northrop.

Lockheed has argued that if the Northrop-TRW deal were approved, the company would become both a prime contractor and a supplier and thus could be reluctant to pass along key technology to its competitors.

To address this concern, Northrop has been seeking a less formal agreement with both the Pentagon and Justice Department in which it would promise to give competitors equal access to its technology.

But, according to industry sources, the Justice Department has been seeking a more formal agreement that would give the agency power to take enforcement action if Northrop were to block such access.

With a self-imposed deadline to complete the TRW merger by year’s end, Northrop management is considering signing the decree, a Northrop source said.

A Northrop spokesman declined to comment but said discussions with the Justice Department were continuing.

Meanwhile, Northrop said in a Securities and Exchange Commission filing Friday that with the TRW acquisition it expected to spend about $720 million for capital expenses in 2003, up 33% from $540 million this year.

Northrop also disclosed that it expected cash from operations next year to be about $1 billion, with cash from operations rising to $1.5 billion in 2004.

Separately, Northrop said it added two directors to its board: Charles H. Noski, retired vice chairman of AT&T; Corp., and retired Adm. Charles R. Larson. Noski, 50, recently retired from the AT&T; board, and Larson rejoins the Northrop board after a brief absence to run for lieutenant governor of Maryland.

Century City-based Northrop’s stock rose $1.12 to $97.12 Friday on the New York Stock Exchange.