NORTHROP GRUMMAN

Northrop Grumman Corporation is a designer, systems integrator and manufacturer of military surveillance and combat aircraft, defense electronics and systems, airspace management systems, information systems, marine systems, precision weapons, space systems, and commercial and military aerostructures.

MERGERS AND ACQUISITIONS

Northrop Grumman was formed in 1994 when Northrop Corporation acquired Grumman Corporation. Also in 1994, the company completed the acquisition of Vought Aircraft, a major producer of military and commercial aerostructures. In March 1996, Northrop Grumman completed the acquisition of the defense and electronics business of Westinghouse Electric Corporation.

In April 2001 Litton Industries was taken over by Northrop Grumman. The $5.1 billion purchase of Litton doubled Northrop's size to $15 billion in annual revenue. In acquiring Litton, Northrop expanded out of its core defense-electronics and information-systems businesses to become one of the Navy's biggest shipbuilders.

On 08 November 2001 Northrop Grumman and Newport News Shipbuilding Inc. announced that they had signed a definitive agreement under which Northrop Grumman acquired Newport News Shipbuilding. Following the close of the transaction, Newport News will initially be operated as a Northrop Grumman sector. Longer term, Northrop Grumman plans to combine its two shipbuilding businesses into one operating sector.

Northrop Grumman and TRW jointly announced 01 July 2002 that they had entered into a definitive merger agreement. With TRW -- chairman, Kent Kresa's 16th acquisition in eight years -- Century City-based Northrop became one of Southern California's largest companies, employing 24,000 people in El Segundo, Redondo Beach, San Diego and Palmdale and helping revive the region's once-dominant role as home to the nation's leading aerospace firms. With the TRW acquisition, Northrop became the nation's second-largest defense firm, with $26 billion in annual revenue, rivaling No. 1 Lockheed Martin Corp. and ahead of No. 3 Boeing Co. It will have 120,000 employees scattered from coast to coast in 44 states and 25 countries.

On July 13, 2010 Northrop Grumman Corporation announced plans to consolidate its Gulf Coast shipbuilding operations and explore strategic alternatives for its Shipbuilding business. Ship construction at Avondale will wind down in 2013. Future LPD-class ships will be built in a single production line at the company's Pascagoula, Miss. facility. The company anticipated some opportunities in Pascagoula for Avondale shipbuilders who wish to relocate. As a result of the consolidation, the company expects higher costs to complete ships currently under construction in Avondale due to anticipated reductions in productivity and, as a result, is increasing the estimates to complete LPDs 23 and 25 by approximately $210 million. Of this amount $113 million will be recognized as a one-time, pre-tax cumulative charge to Shipbuilding's second quarter 2010 operating income. The balance will be recognized as lower margin in future periods, principally on the LPD 25. The company also anticipates that it will incur substantial restructuring and facilities shutdown-related costs including, but not limited to, severance, relocation expense, and asset write-downs. These costs are expected to be allowable expenses under government accounting standards and recoverable in future years under the company's contracts. The company estimates that these restructuring costs will be more than offset by future savings expected to be generated by the consolidation.

"Our decision to consolidate the Gulf Coast facilities is driven by the need for rationalization of the shipbuilding industrial base to better align with the projected needs of our customers. The consolidation will reduce future costs, increase efficiency, and address shipbuilding overcapacity. This difficult, but necessary decision will ensure long-term improvement in Gulf Coast program performance, cost competitiveness and quality," said Wes Bush, chief executive officer and president. "We are extremely proud of our Avondale shipbuilders and their dedicated contributions to our company and our nation. We will work with federal, state and local officials and others to explore alternate uses for Avondale as the last two ships under construction reach completion," said Bush.

As a result of the Gulf Coast consolidation, the company will recognize an estimated pre-tax charge of $113 million in the second quarter of 2010. In addition, as previously disclosed, in the second quarter of 2010, the company will record a tax benefit of $296 million related to the final settlement with the Internal Revenue Service of tax returns for the years 2004 through 2006. The net impact of the charge and the tax benefit will increase second quarter 2010 earnings from continuing operations by about $0.73 per share. Neither of these items is reflected in the financial guidance the company provided on April 28, 2010.

The consolidation of Gulf Coast ship construction is the next step in the company's efforts to improve performance and efficiency at its Gulf Coast shipyards, which began with the integration of its shipbuilding operations in early 2008. Since that time, Gulf Coast organization and leadership, operating systems, program execution, risk management, engineering, and quality have been the focus of intense improvement efforts. Consolidating new ship construction on the Gulf Coast in one shipyard will position Shipbuilding to achieve additional performance improvement and efficiency over the long term.

"Our decision to explore strategic alternatives for Shipbuilding is the result of a portfolio assessment to determine how to best serve our shareholders, customers, and employees. The performance improvement initiatives underway in our Gulf Coast operations will be further enhanced by the facilities consolidation. Recognizing our company's long-term strategic priorities, we foresee little synergy between Shipbuilding and our other businesses. It is now appropriate to explore separating Shipbuilding from Northrop Grumman," said Bush. The company will evaluate whether a separation of Shipbuilding would be in the best interests of shareholders, customers and employees by allowing both the company and Shipbuilding to more effectively pursue their respective opportunities to maximize long-term value. Strategic alternatives for the Shipbuilding business include, but are not limited to, a spin-off to Northrop Grumman shareholders. The company has engaged Credit Suisse as its lead financial advisor. The company is also being advised by Perella Weinberg Partners.

Northrop Grumman Corporation and Orbital ATK, Inc. (NYSE:OA), a global leader in aerospace and defense technologies, announced 18 September 2017 they have entered into a definitive agreement under which Northrop Grumman would acquire Orbital ATK for approximately $7.8 billion in cash, plus the assumption of $1.4 billion in net debt. Orbital ATK shareholders would receive all-cash consideration of $134.50 per share. The agreement had been approved unanimously by the Boards of Directors of both companies. The transaction was expected to close in the first half of 2018 and is subject to customary closing conditions, including regulatory and Orbital ATK shareholder approval.

Northrop Grumman and Orbital ATK compete in different segments, with Northrop competing against Lockheed Martin and Boeing in the high-end market as a prime, and Orbital competing in the small sat category and also as a supplier on large programs. The acquisition gives Northrop more options in DoD growth segments, such as missile defense (both U.S. Ground-based Mid-course Defense and regional systems) and space (across the board in access/launch, large/small sats and payloads). We also see this giving Northrop exposure to the munitions refill cycle for both U.S. and some foreign military sales.