NEW YORK (AP) — Five weeks after closing a deal to buy Litton Industries Inc. for $3.8 billion, Northrop Grumman Corp. made a surprise bid matching General Dynamics Corp.'s $2.1 billion offer for Newport News Shipbuilding Inc.
Northrop Grumman chairman and CEO Kent Kresa said his company's offer stands a better chance of being approved by federal regulators because a combination of General Dynamics and Newport News would allow one company to control all of the nation's nuclear shipyards.
"In short, we believe a General Dynamics-Newport News combination would eliminate competition, endanger national security and be costly both to the Navy and the American taxpayer," Kresa said in a letter released Wednesday to Newport News chairman and CEO William Fricks.
General Dynamics, stung by the challenge to its effort to become the sole builder of Navy aircraft carriers and submarines, criticized Northrop Grumman's move.
In a statement Tuesday night, General Dynamics said it was "disappointed that Northrop Grumman has chosen to interfere in a proposed transaction agreed upon by the respective boards of directors of General Dynamics and Newport News Shipbuilding."
Newport News said in a statement Wednesday that its board of directors would consider the Northrop offer.
General Dynamics, based in Falls Church, Va., and Newport News, based in Newport News, Va., announced their proposed combination two weeks ago. Company officials said the merger would streamline management of the two nuclear-capable shipyards in the United States and save money for the Navy, their biggest customer.
Company officials said there would be no antitrust issues because General Dynamics and Newport News already have been cooperating on nuclear submarine construction. Kresa disagreed.
"We believe, and we believe many already agree, that there is enormous national security value for the United States in maintaining, not eliminating competition," he said in the letter.
Pentagon spokesman Glenn Flood said the Pentagon had not seen an official announcement from Northrop Grumman. He had no comment except to say that if Northrop Grumman submits a bid the Pentagon would play its usual role in reviewing it for the Justice Department.
Northrop's bid for Newport News would come in at the same $67.50 per share price as General Dynamic's offer, Kresa said.
The offer is 75 percent stock and 25 percent cash, while General Dynamic's proposal is an all-cash transaction. Both offers include the assumption of $500 million of Newport News' debt.