Newport News Shipbuilding
Inc. said Wednesday its board voted to back the $2.1 billion takeover offer from defense contractor General Dynamics Corp. over a rival bid from Northrop Grumman Corp.
Newport News, maker of nuclear-powered warships, said its board voted unanimously to recommend General Dynamics' all-cash offer of $67.50 per share after determining it did not have enough information on the views of federal regulators and defense officials to take a position on the Northrop bid.
Newport, based in Newport News, Va., also noted its board believes the General Dynamics' deal gives stockholders the opportunity to receive better and more certain value than they would receive under Northrop's cash and stock offer.
"We will seek to determine the position of the U.S. government regarding these two offers as expeditiously as possible," said Newport Chairman and Chief Executive Bill Fricks.
"The primary interest of the board of directors is for our stockholders to receive the best value for their shares in any acquisition of Newport News Shipbuilding
," he was quoted as saying.
The Pentagon's top weapons buyer said the Defense Department was reviewing the rival bids for Newport News and would likely make a recommendation within weeks.
However, Los Angeles-based Northrop said it would not give up its effort despite the Newport News board's decision.
"Northrop Grumman is disappointed but undeterred by the Newport News board of directors' response to our offer to acquire the company," a company spokesman said. "Northrop Grumman remains fully committed to proceeding forward as we believe our offer is clearly superior and does not create a monopoly and therefore has a greater probability of gaining regulatory approval."
The spokesman added that Northrop Grumman will be prepared to negotiate all the terms of its offer upon completion of the due diligence process.
"This is just a step along the path," said Cai von Rumohr, stock analyst at SG Cowen. "The timing of regulatory issues remains critical here.
"This issue here is that the General Dynamics deal clearly presents greater potential antitrust issues, but clearly offers greater cost savings to the Navy," von Rumohr said.
A General Dynamics-Newport News combination would bring the nation's two nuclear-capable shipyards under one roof, combining Newport's position in nuclear-capable aircraft carriers with
General Dynamics' business in submarines.
The combination of Northrop with Newport News would create a top-tier defense contractor with a commanding position in all surface ships. -- (Reuters)