Pentagon Expected To OK NNS Deal
The Pentagon is widely expected to clear the proposed $2.1 billion merger between the two remaining U.S. builders of nuclear submarines and aircraft carriers, eliminating prospects of any future competition between former rivals. Defense Department officials recognize the peculiarities of the situation faced by General Dynamics Corp. and Newport News Shipbuilding Inc., according to antitrust lawyers, industry consultants and Wall Street analysts. With only one major customer -- the U.S. military -- and declining demand for nuclear submarines, there is simply not enough business to go around. "Let's face it, there's only one buyer in these kinds of situations," said Richard Steuer, chairman of the antitrust practices group at Kaye, Scholer, Fierman, Hays & Handler in New York.
GD Reports Good Quarter
General Dynamics Corp., maker of nuclear submarines, tanks and destroyers, reported an 11 percent increase in second-quarter profits, meeting Wall Street targets, on gains in its combat systems operations. The company, which is battling rival defense contractor Northrop Grumman Corp. to take over Newport News Shipbuilding Inc., posted net earnings of $227 million, or $1.12 per share, up from $204 million, or $1.01 per share, a year earlier. Analysts had expected a profit of $1.12 per share, with estimates ranging from $1.08 to $1.15, according to tracking firm Thomson Financial/First Call. Sales rose to $2.96 billion from $2.62 billion a year earlier. Cash flow from operations for the second quarter was $208 million.
General Dynamics Drops Bid for NNS
General Dynamics Corp. dropped its unsolicited $1.4 billion bid for Newport News Shipbuilding Inc. (NNS) after the government said it would oppose the union. "While we find the Department of Defense's decision disappointing, we respect it and have withdrawn our offer," said Nicholas Chabraja, chairman and CEO. General Dynamics announced the offer, which valued NNS at $38.50 a share, in February. NNS, which already had a pending agreement to buy Avondale Industries, Inc. for $470 million, asked the government to review it. "General Dynamics believes that its proposed acquisition of NNS would have meant significant savings for the U.S. Navy, enhanced value for the shareholders of both companies, and still preserved jobs," the company said.
