Page 44: of Maritime Reporter Magazine (September 1995)

BIW Sale Invites Industry Speculation

General Dynamics to purchase Maine yard for $300 million

On August 17,1995, General Dy- namics and Bath Iron Works (BIW) announced a "definitive agreement" for BIW to become a subsidiary of

General Dynamics, for a price of $300 million.

According to General Dynamics, owners of the Trident and Seawolf- producing Electric Boat Division (Groton, Conn.), the transaction has been approved by the board of directors at both General Dynam- ics and BIW. Some industry ex- perts view the sale of the Maine yard — which produces Arleigh

Burke class destroyers — as a con- solidation of the defense industry, and speculation is that General Dy- namics will seek to expand its de- fense-related holdings even further.

Commenting on this speculation,

General Dynamics' Corporate Di- rector of Public Affairs, Norine by Bridget A. Murphy, assistant editor

Lyons, said: "We have said that we're open to offers," although she refused to discuss details.

Although BIW's 1995 revenues have been estimated to be $800 million, the sale of BIW for $300 million is a significant drop com- pared with the $580 million sale price it commanded from New York investment group Gibbons,

Goodwin & Van Amerongen in 1986.

General Dynamics will not assume any of the yard's debt.

Although no official word has been given, the general feeling is that while a facility upgrade may be in order for the new General Dy- namics' subsidiary, no attempt will be made to attract commercial or- ders. "They (Bath Iron Works offi- cials) have said publicly that they don't see much there. We tend to agree," said Ms. Lyons.

While the company's current in- tent is not to pursue commercial work, this will not necessarily in- crease other major U.S. shipyards' chances of landing commercial bids. "I don't believe that this will have a significant impact on the other yards winning more commercial bids," said Tom Bowler, president of the American Shipbuilding Asso- ciation (ASA). "Avondale and New- port News have surprised armchair critics by being able to compete and win international contracts. I be- lieve that Avondale, Newport News, as well as NASSCO, will continue to compete for commercial contracts."

In evaluating the takeover's po- tential effect on the industry as a whole, Mr. Bowler's outlook was encouraging. "The sale is certainly a positive move for the industry. It will make Bath Iron Works' finan- cial condition much stronger. Per- haps more important, Bath now has an owner that is deeply familiar with the defense industry, and also has experience in the shipbuilding industry."

He also predicted the sale will not significantly affect both yards' conducting "business as usual." Mr.

Bowler said, "I don't see any imme- diate effect. My understanding is that Bath Iron Works and Electric

Boat will remain as separate oper- ating entities...There appears to be no plan of a mass merging of the shipyards. Both have significantly different product lines, both pro- ducing complicated ships in their own design."

Perhaps the rationale for the sale of Bath to General Dynamics was most consisely summed up by

Ms. Lyons, "We have the financial capability to improve the competi- tiveness of the yard." And General

Dynamics' strategy for attracting further Pentagon spending? "Affordability, building the best at the best prices," added the General

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