Northrop Grumman to Acquire Litton Industries

Northrop Grumman Corp. announced it plans to buy Litton Industries Inc. for US$3.8 billion. The deal will help Northrop compete for prime military contracts instead of settling for supporting roles. The combined companies would have annual revenues of US$15 billion, growing to US$18 billion by 2003.

Northrop will pay US$80 for each share of Litton common stock and US$35 for each series B preferred share and will assume US$1.3 billion in Litton debt. As of September 30, Northrop debt stood at US$1.07 billion. Credit Suisse First Boston and Chase Manhattan Bank are providing US$6 billion in financing to Northrop, which said the purchase would boost earnings by 7 to 10 percent in 2001, excluding pension income and amortization and including a planned sale of new stock. Investment banks Salomon Smith Barney and Goldman Sachs & Co. advised Northrop on the deal, while Merrill Lynch & Co. advised Litton. The deal is expected to close in the first quarter of 2001, pending approval by the U.S. Justice and Defense Departments under the incoming administration, which are not expected to oppose it. Northrop employment will double to 79,000.

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