Posted on: Monday, March 4, 2002

TRW spurns takeover bid

Associated Press

CLEVELAND — TRW Corp. rejected an unsolicited $5.9 billion takeover offer from Northrop Grumman Corp. late last night, saying the offer was inadequate.

The TRW board voted unanimously to reject the offer, the company said in a statement shortly before midnight.

"The TRW board of directors concluded that Northrop Grumman's proposal was financially inadequate," the statement said.

TRW said the Northrop Grumman proposal "undervalues" TRW's leadership positions in the space, defense, information systems and automotive parts industries.

"This is all about shareholder value, and the Northrop Grumman proposal does not begin to recognize the value of TRW's franchise," said Philip A. Odeen, TRW chairman.

Odeen and Kenneth A. Freeman, lead director in TRW's review of the takeover bid, informed Northrop Grumman of the decision in a letter to its chairman, Kent Kresa.

"The board views Northrop Grumman's proposal as an opportunistic attempt to acquire one of the industry's leading space and electronics and systems businesses at a time when TRW's stock price was temporarily depressed after the sudden departure of David Cote, our former chairman, president and chief executive officer," the letter said.

The letter said directors had reviewed the bid and concluded "there is no reason to explore Northrop Grumman's proposal further."

As part of its offer last month, Northrop said it would sell TRW's automotive parts business, which accounts for 64 percent of TRW's sales and 58 percent of profits, if TRW accepted the offer.

Analysts concluded that Northrop would benefit most from TRW's satellite production unit, which makes satellites used by the military to spy on enemies and coordinate troops, ships and airplanes.

Northrop makes sensors for satellites, but is a relatively small player in the market for military products used in outer space.

Northrop said the deal would generate sales in 2003 of between $26 billion and $27 billion, putting the company slightly ahead of Lockheed Martin, the largest U.S. defense contractor, in terms of total sales.

Based on Pentagon contracts, the combined company would still lag d Lockheed and Boeing, according to the Defense Department.

TRW was the Pentagon's eighth-largest contractor in 2001 and 2000, with sales of $1.9 billion in 2001 and $2 billion in 2000.