Northrop Grumman increases offer for rival defense contractor TRW to $6.7 billion

Monday, April 15th 2002, 12:00 am
By: News On 6

CLEVELAND (AP) _ TRW Inc. advised its shareholders again Monday not to respond to a takeover bid from defense contractor Northrop Grumman Corp., which has raised its offer to $6.7 billion.

Northrop Grumman increased its bid on Sunday, a month after TRW's board rejected its original unsolicited offer of $5.9 billion for a second time. Kent Kresa, chairman and chief executive officer of Los Angeles-based Northrop Grumman, said TRW has become more valuable because of improving economic conditions.

The new offer is valued at $53 a share, compared with an original offer of $47 a share. Northrop Grumman extended the offer to May 3.

The latest offer was in line with what analysts had said was needed to close the deal. Last month, Andrew Casey of Prudential Securities put the value of a TRW plan to boost shareholder value, including spinning off its automotive parts, at $52 per share.

TRW on Monday reissued its original statement urging shareholders not to respond to Northrop Grumman's overture, and declined to elaborate.

TRW shares rose 44 cents to $52.41 in afternoon trading Monday on the New York Stock Exchange while Northrop shares fell $2.28 to $116.03.

Less than 2 percent of TRW's shares had been offered by the Friday midnight deadline of Northrop's previous offer.

Frank Moore, a Northrop spokesman, said the latest offer was a 38 percent premium over the average TRW stock price over the past year and 33 percent premium over the stock price just before the first Northrop bid.

``We believe it (the latest offer) should be attractive to TRW shareholders,'' he said Monday.

In response to the takeover attempt, TRW said last month it plans to spin off its automotive parts business within nine months.

The automotive business _ best known for air bags, seat belts and sensors _ accounts for 64 percent of the company's sales and 58 percent of profit.

TRW's space and defense business _ the takeover target _ had sales of $5.2 billion last year. Kresa has said Northrop Grumman would spin off or sell the automotive portion after a merger.