CLEVELAND — TRW Inc. on Wednesday rejected defense contractor Northrop Grumman Corp.'s sweetened $6.7 billion takeover offer, saying it was inadequate.
TRW, which makes defense and aerospace equipment and automotive parts including air bags and seat belts, said its proposal to spin off its automotive units would provide more value to shareholders. TRW employs about 400 people in Utah, primarily in Clearfield.
"As we've said all along, this is all about shareholder value and this board will continue to do what is in the best interests of TRW shareholders," said TRW chairman Philip A. Odeen.
The TRW board unanimously rejected the latest offer of $53 a share by Los Angeles-based Northrop Grumman. One director was absent.
Northrop had boosted its earlier offer of $47 per share for TRW earlier this week. TRW's stock closed Tuesday at $52.38 on the New York Stock Exchange and was up $1.77, or 3.4 percent, to $54.15 in early trading Wednesday.
Northrop Grumman spokesman Frank Moore said Wednesday that the company is confident that TRW shareholders will approve Northrop's offer over the proposed restructuring plan by TRW.
The rejection came after the company reported first-quarter profits of $91 million, or 71 cents per share, up 17 percent from $78 million, or 62 cents per share, in the first quarter of 2001. Those figures include unusual items and reflect changes in accounting rules.
Excluding the charges, the company reported a profit of $92 million, or 71 cents a share, 7 cents ahead of estimates of analysts surveyed by Thomson Financial/First Call.
TRW sales for the most recent quarter were $4.1 billion, down from first-quarter 2001 sales of $4.2 billion.
"TRW again demonstrated its dedication to meeting commitments, strong profit growth and debt reduction," Odeen said.
Odeen questioned the legitimacy of the Northrop offer.
"Northrop's newly imposed condition that their offer is subject to satisfactory completion of due diligence undermines the legitimacy of Northrop's purported price increase," Odeen said.
Cleveland-based TRW said it had been advised by both Goldman, Sachs & Co. and Credit Suisse First Boston Corp., acting as outside financial advisors, that the Northrop offer was inadequate.
TRW, which had urged shareholders to hold off acting on Sunday's higher offer from Northrop, said shareholders should reject the latest bid and discard proxy materials sent by Northrop.
TRW said Northrop must sign a confidentiality agreement if it wants to scrutinize TRW's books through due diligence. That offer is open to other interested parties, TRW said.
Last month TRW rejected Northrop's unsolicited offer of $5.9 billion and said they would spin off the company's automotive parts business within nine months.
Less than 2 percent of TRW's shares had been offered by late Friday in response to Northrop's previous offer, which had a midnight Friday deadline.
Northrop has about 100,000 employees in 44 states and 25 countries. TRW has 94,000 workers, about half in its automotive business.
Northrop has said about 30,000 of TRW's employees have jobs with business units Northrop wants to keep and that there would no widespread cuts in those divisions.