Northrop Grumman Nears Deal to Buy Orbital ATK, Sources Say -- Update
September 17 2017 - 7:32PM
Dow Jones News
By Dana Mattioli
Northrop Grumman Corp. is nearing a deal to buy Orbital ATK Inc.
in a transaction that could be worth upward of $7.5 billion, as
acquisition activity in the aerospace industry ramps up.
An all-cash tie-up between the two defense contractors could be
announced Monday, according to people familiar with the matter.
Terms of the transaction couldn't be learned, but with a typical
takeover premium, it could value Orbital, which currently has a
market value of $6.3 billion, at more than $7.5 billion. Northrop
has a market capitalization of more than $45 billion.
The impending deal comes on the heels of another big aerospace
union just announced earlier this month when United Technologies
Corp. agreed to buy Rockwell Collins Inc. for about $23
billion.
A purchase of Orbital would add to Northrop Grumman's existing
focus on military aircraft and space systems, expanding the
franchise to include more fast-growing missile-defense
business.
Orbital provides space rocket motors and other parts for
offensive and defensive missile systems, as well as satellites for
military and commercial space operations. It was formed in 2015
from the merger of two missile and space specialists, Alliant
Techsystems and Orbital Sciences. Orbital ATK employs about 13,000
and is targeting sales this year of $4.6 billion.
Its role in space and missile systems has led some analysts to
view the company as a potential takeover target for big customers
such as Boeing Co., Lockheed Martin Corp., or Northrop.
Northrop, which beat out Boeing and Lockheed to build the new
B-21 Raider long-range bomber, is also competing to build a new
fleet of intercontinental ballistic missiles for the U.S.
Northrop is vying with Boeing for the Ground-Based Strategic
Deterrent nuclear missile program, and has joined with Orbital and
fellow rocket maker Aerojet Rocketdyne Inc. during the current
development phase of the $80 billion program.
Domestic and international defense budgets are starting to climb
because of tensions in the Middle East, Eastern Europe and East
Asia, with missile defense a priority for many nations.
Meanwhile, some defense contractors are seeking to become more
vertically integrated, bringing production in house to give them
better control of the supply chain and an ability to capture extra
profits from repair work; this deal would fit into that pattern as
well.
The planned purchase of Orbital marks a departure for Northrop,
which has focused heavily on share buybacks, retiring around 25% of
its stock over the past three years.
A deal involving the big prime defense contractors may be less
likely to attract antitrust scrutiny than other proposed mergers
because of their limited product overlap, though the Pentagon has
in recent years become more involved in scrutinizing
transactions.
Write to Dana Mattioli at dana.mattioli@wsj.com
(END) Dow Jones Newswires
September 17, 2017 19:17 ET (23:17 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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