Northrop to Buy Orbital ATK in Potential $9.2B Deal; Wes Bush, David Thompson Comment

Northrop Grumman (NYSE: NOC) has agreed to purchase Orbital ATK (NYSE: OA) for approximately $9.2 billion in a push to accelerate innovation efforts and expand technology offerings.

Falls Church, Virginia-based Northrop said Monday it will pay $7.8 billion in cash and assume $1.4 billion in net debt from Orbital ATK under the transaction.

Northrop intends to run the Dulles, Virginia-based aerospace and defense contractor as its fourth business sector upon the deal’s completion.

Orbital ATK stockholders will get $134.50 in cash per share under the transaction that has received unanimous approval from both companies’ boards of directors.

Both companies expect to close the transaction in the first half of 2018, subject to approvals by Orbital ATK shareholders and regulatory authorities.

Northrop expects the deal to be accretive to earnings per share in the first year, realize approximately $150 million in annual pre-tax cost savings by 2020 and generate about $30 billion in 2017 pro-forma sales.

Wes Bush, Northrop chairman, president and CEO, said both companies aim to facilitate competition in critical security domains and broaden capabilities in support of clients’ requirements as well as yield value creation through the combination of both firms’ portfolios and “technology-focused cultures.”

David Thompson, president and CEO of Orbital ATK, said the transaction would help Orbital ATK seek new opportunities, maintain performance on current programs and provide career opportunities to employees.

Bush and Thompson are both inductees into Executive Mosaic’s Wash100 for 2017.

Perella Weinberg Partners LP and Cravath, Swaine & Moore LLP respectively serve as financial and legal advisers to Northrop in the transaction.

Citigroup advises Orbital ATK on the deal’s financial aspects, while Hogan Lovells US LLP serves as the firm’s legal counsel.

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