Northrop Grumman Corp.'s pending acquisition of TRW Inc. will create one giant defense contractor with extensive use of and research into composites, and an independent automotive supplier with expertise in thermoplastics.
The two companies announced July 1 they have reached a definitive agreement for Northrop Grumman to buy TRW in an all-stock deal valued at $7.8 billion - a $1.9 billion jump from Northrop's earlier, hostile bid of $5.9 billion for Cleveland-based TRW.
Both Northrop and TRW plan to sell or spin off TRW's automotive unit, a nearly $10 billion business group that ranks among the 10 largest auto supply companies globally. TRW already has started the spinoff process, with its shareholders taking stock in the independent business - although it also is continuing to seek a suitor interested in buying the group, said Chairman Philip Odeen.
The firms anticipate they will complete the auto separation by the time Los Angeles-based Northrop Grumman completes its acquisition, by the end of 2002.
The new Northrop Grumman will be the second-largest defense contractor in the United States, and one with extensive composites expertise.
TRW has graphite composites, carbon fiber and ``other, more exotic materials'' in its satellites, spacecraft structural components and antenna arrays, said spokesman Jack Pritchett.
Northrop Grumman, meanwhile, uses carbon fiber in its aircraft, including the B2 ``stealth'' bomber, in ships and elsewhere. It is a partner in producing the new F-35 Joint Strike Fighter, which will use composites to make up 36 percent of its structural weight.
The capabilities of TRW's satellites and surveillance technology will make a solid combination with Northrop's air and sea transport specialties, both companies said.
``The acquisition of TRW adds a critical node - space - to our capabilities,'' said Kent Kresa, Northrop Grumman chairman and chief executive officer.
Northrop Grumman launched a bid to buy out TRW in February, just days after its CEO, David Cote, left to join Honeywell International Corp. Its first offer was for $47 worth of Northrop Grumman stock per TRW share.
That proposal spurred interests from other suitors - and TRW's proposal to sell its aeronautical systems business and sell or spin off automotive. Goodrich Corp. stepped forward to buy the aeronautics business June 18 for $1.5 billion.
The auto unit includes thermoplastics in everything from heating and air-conditioning systems to steering wheels and air-bag components.