Northrop Grumman to Buy Orbital ATK for $7.8 Billion
The military contractor Northrop Grumman said on Monday that it would buy Orbital ATK, a maker of components for missiles and satellites, for about $7.8 billion in cash, amid a rise in consolidation in the aerospace industry.
For aerospace companies, the prospects of combining — and the possible cost savings from doing so — appear to be increasingly attractive. This month, United Technologies said it planned to buy Rockwell Collins for $23 billion, bringing together stables of products that include nearly every part of planes.
Under the terms of the deal announced on Monday, Northrop would pay $134.50 for each Orbital ATK share, a 22 percent premium to the closing price on Friday. Including the assumption of debt, the proposed transaction is valued at about $9.2 billion.
Buying Orbital ATK would expand Northrop’s presence in the market for missiles and rockets as many countries are increasing their military budgets. The Trump administration has proposed giving the Defense Department tens of billions of dollars in additional funding in the next fiscal year, much of which is expected to survive the budget-making process in Congress.
One of the Pentagon’s priorities is revamping the country’s nuclear arsenal. The missile business is also growing fast, particularly as missile defense becomes a bigger concern for countries around the world.
Northrop, one of the top aerospace suppliers to the American military, has largely shied away from big deals. Its last major agreement was in 2012, when it purchased TRW for about $7.8 billion.
“The acquisition of Orbital ATK is an exciting strategic step as we continue to invest for profitable growth,” Wesley G. Bush, Northrop’s chairman and chief executive, said in a statement. “Through our combination, customers will benefit from expanded capabilities, accelerated innovation and greater competition in critical global security domains.”
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