Northrop Grumman, Newport News Shipbuilding Announce Definitive Merger Agreement

Thursday, November 08, 2001
Northrop Grumman Corporation and Newport News Shipbuilding Inc. announced today that they have signed a definitive agreement under which Northrop Grumman will acquire Newport News Shipbuilding.

The boards of directors of both companies approved the terms of the transaction in which Northrop Grumman will acquire all the outstanding shares of Newport News. In an exchange offer, Newport News Shipbuilding's shareholders may elect to receive either $67.50 per share in cash or a number of shares of Northrop Grumman common stock designed to provide a value of $67.50, subject to certain limitations and proration procedures. Northrop Grumman expects to promptly amend its existing offer documents in order to reflect the merger agreement.

Following the completion of the exchange offer, Northrop Grumman will consummate a second-step merger in which all of the remaining Newport News Shipbuilding shareholders will have the same right to elect to receive cash or shares of Northrop Grumman stock as described above.

"We are very pleased with our strategic acquisition of Newport News," said Kent Kresa, Northrop Grumman chairman and chief executive officer. "With Newport News, we are creating a $4 billion world-class, fully capable shipbuilding enterprise with expertise in every class of nuclear and non-nuclear naval vessel. Newport News' long and distinguished history and reputation for innovation and excellence in shipbuilding are highly regarded worldwide. We look forward to welcoming the 17,800 Newport News employees to the growing Northrop Grumman family."

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. Thomas Schievelbein, currently Newport News' executive vice president and chief operating officer, will become president of the Newport News operating sector. He will also serve on Northrop Grumman's corporate policy council. Fricks has announced his intention to retire once the transaction has been finalized.

The acquisition is valued at approximately $2.6 billion, which includes the assumption of approximately $500 million of Newport News Shipbuilding debt. The exchange offer, subject to the tendering of a majority of the outstanding Newport News Shipbuilding shares, is expected to close by the end of November.

Citigroup's Salomon Smith Barney acts as principal strategic advisor to Northrop Grumman and represented the company in the transaction. JP Morgan Chase also provided financial advice. Newport News Shipbuilding was advised by Credit Suisse First Boston.

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