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EDITIONS
Monday, 1 July, 2002, 13:09 GMT 14:09 UK
US arms giants in $7.8bn merger
TRW satellite being launched
TRW's space expertise is Northrop's main target
After four months of wrangling, Northrop Grumman, the US defence company, is to buy fellow US weapons maker TRW for the equivalent of $7.8bn (5.1bn) in shares.

The combined company will have sales of about $26bn a year, putting it into second spot in the US after Lockheed Martin, whose leadership position has been secured by its contract to build the joint strike fighter.

The deal follows weeks of bidding and counterbidding as rivals on both sides of the Atlantic tried to get their hands on TRW's lucrative defence electronics and satellite business.

The losers in the bidding war are BAE Systems of the UK, and General Dynamics, a US competitor.

It marks a return to consolidation in the industry after half a decade spent bedding down the massive mergers in the mid-1990s, which brought both Northrop Grumman and fellow giant Lockheed Martin into being.

"Today's acquisition adds the last critical node of space to our robust and well-diversified defence platform and systems capabilities operating on the ground, at sea and in the air," said Kent Kresa, Northrop's chairman and chief executive.

BAE Systems, the UK's main defence contractor, and General Dynamics were unable to match the $60 a share which Northrop is offering.

Long haul

Northrop Grumman had a previous offer worth about $6.7bn turned down by TRW.

It lost out in part because the law in Ohio - where TRW is based - sets a sequence of hurdles in the way of hostile takeovers, in the hope of keeping companies in the state.

As the bidding process unfolded Northrop changed its tack and tried to get the board of TRW on its side.

That tactic looks to have come to fruition.

TRW is a specialist in information systems, but also builds equipment for the car market, a business which is now likely to be sold off or spun off to shareholders separately.

Its aeronautical systems unit is already being sold to Goodrich Corp for $1.5bn.

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The BBC's Mark Gregory
"The main corporate loser is BAE Systems, which had hoped to buy parts of TRW."
See also:

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