The battle continues for long-term ownership of TRW Inc., but even if an unsolicited buyout bid from competitor Northrop Grumman Corp. fails, TRW's automotive unit still is slated to spin off on its own by the end of this year.
Executives with Cleveland-based TRW encouraged its shareholders to reject the $47 per-share offer from defense contractor Northrop. They claim their own plan to revamp operations - by selling off the commercial aerospace division and spinning off automotive to its own shareholders by the end of this year - represents more value.
``Our board believes the [offered] share price is grossly inadequate,'' TRW Chairman Philip Odeen said in a March 13 conference call. ``Forty-seven dollars does not begin to recognize the value of TRW's franchise.''
The auto unit - with plastics processing for a mix of programs including injection molded heating and air-conditioning vents, steering wheels, air bags and seat belt systems - would operate with its existing management team, he said.
The spinoff will take place after TRW sells its aerospace unit, using that cash to decrease debt levels. The move would leave two independent, ``pure play'' companies, one committed to auto, the other to the defense industry.
But Northrop has fired back, stating that its offer has a higher degree of certainty than the multistage proposal TRW developed, and it remains ``fully committed.''
``TRW promises to explore a variety of contingent actions ... while arguing that its shareholders should hold out hope that these potential actions can deliver value,'' Kent Kresa, Northrop Grumman chairman and chief executive officer, said in a news release. ``In contrast, Northrop's proposal represents a single, coherent, well-defined transaction that will provide excellent value immediately.''
Los Angeles-based Northrop Grumman launched its takeover bid Feb. 22, just days after TRW's then-chairman, David Cote, left to take the top job at Honeywell International Corp. - offering $47 worth of its stock for every share of TRW stock. It would separate the auto unit after taking over the company.
At that time, TRW shares were trading for a little less than $40. Speculation since has driven the stock to more than $50. Northrop's stock has hovered between $105 and $110 for two months.
Kresa also said TRW management has kept his company at arm's length, refusing to provide information that could prompt Northrop to offer more money.
