Page 20: of Maritime Reporter Magazine (February 1999)

SHIPYARD REPORT

Consolidation of Power

The U.S. shipbuilding market continues its amazing metamorphisis, as Newport News Shipbuilding and

Avondale Industries will combine thier considerable resources in $470-million proposed deal.

The U.S. shipbuilding industry continued its incredible metamor- phosis with the announcement of a proposed merger between Newport

News Shipbuilding (NNS) and

Avondale Industries, a merger which would — pending share- holder acceptance — create arguably the most powerful combi- nation of maritime resources in the world.

The merger can be viewed as one more indication of how prevail- ing international business winds have spurred unprecedented levels of mergers, takeovers and consoli- dations, inside and out of the mar- itime industry.

Roots of the merger can also be traced, in essence, to the world's continually changing political cli- mate, specifically the death of the

Cold War. It was this historic event which precipitated the U.S.

Navy fleet drawdown, resulting in far less business for the country's shipbuilders and leading to a host of new alliances and partnerships formed to bid for the remaining navy work. It became, then, only a matter of time before these loose alliances became official mergers and takeovers.

As the companies pointed out in releasing the deluge of data regarding the proposed merger, the $470 million merger creates a broad-based shipbuilding company capable of designing, building and maintaining every ship in the U.S.

Navy fleet. The new company will not only be technically capable, but geographically diverse, with a strong presence on the East, West and Gulf Coasts, a move designed to further enable it to become the full service shipbuilder of choice for the U.S. Navy. Newport News acquired San Diego-based

Continental Maritime Industries in December 1997 as the first step in its ongoing strategy to create a comprehensive inventory of ser- vices to the Navy's aircraft carrier fleet.

The transaction creates a ship- building company — to be known as Newport News Avondale

Industries —with estimated 1999 revenues of $2.6 billion and nearly 24,000 employees. "The combination of Newport

News and Avondale brings togeth- er two highly skilled and tremen- dously capable shipbuilding com- panies," said William P. Fricks,

Chairman and CEO of Newport

News. "We believe the new compa- ny holds immense promise, and we expect to deliver measurable results in the form of higher returns for shareholders, enhanced value for our customers, and increased long term opportu- nities for employees."

Albert L. Bossier, Jr.,

Chairman and CEO of Avondale, said: "This merger is about build- ing a stronger combined company.

Avondale's experience in the con- struction of Navy and commercial surface ships complements

Newport News' strengths in air- craft carrier and submarine con- struction, refueling, and overhaul.

Together, we can design, build, and maintain every ship in the Navy and Coast Guard fleets."

There will be a five-person exec- utive management committee of the combined company. Bill Fricks will serve as Chairman and CEO.

A1 Bossier will serve as Vice

Chairman while also retaining his position as President and CEO of

Avondale. David J. Anderson will serve as Senior Vice President and CFO. Thomas C.

Schievelbein will be Executive

Vice President, as well as COO of

Newport News. Thomas M.

Kitchen will be Executive Vice

President, and will become COO of

Avondale. Bossier and two current outside directors of Avondale will join the company's board. $8 Billion Backlog "Our funded contract backlog will total nearly $6 billion," said

Fricks. "Total backlog, including options and planned funding, is nearly $8 billion. Significantly, the combined company's backlog rep- resents a broad spectrum of ship- building programs, the majority of which is comprised of long term

U.S. Navy programs."

Newport News' backlog includes over $2.5 billion for aircraft carrier construction, refueling, and life cycle maintenance extending through 2002. Submarine con- struction programs represent nearly $1 billion in funded back- log, with an additional $1 billion expected to be funded in the next three years.

Avondale's funded backlog of $2 billion includes design and con- struction of two LPD amphibious assault ships, which are the first of a 12-ship class to be built for the

Navy. Avondale also is construct- ing a series of six RoRo transport ships for the Military Sealift

Command, three crude oil carriers for ARCO Marine, a subsidiary of

Atlantic Richfield, and is sched- uled to deliver the Polar

Icebreaker WAGB Healy to the

U.S. Coast Guard in mid-1999.

Earlier this year, Avondale established its Maritime

Technology Center of Excellence aimed at developing and applying state-of-the-art techniques to ship design and construction. Newport

News expects to begin construction in 1999 of the Virginia Advanced

Shipbuilding and Carrier

Integration Center, a facility intended to exploit innovative technologies in the construction, integration, and life cycle mainte- nance of future aircraft carriers and other ships in the Navy fleet.

NNS Milestones 1886—NNS founded by rail- road magnate Collis P.

Huntington (pictured) and incorporated as Chesapeake

Dry Dock and Construction

Company. 1889—The first dry dock was flooded for the official opening. The dock was hailed by the maritime press as "a wonder of the age." 1890—Name changed to Newport News

Shipbuilding and Dry Dock Co. 1891—Hull No. 1, the tugboat

Dorothy (pictured to the right) was delivered. 1897—The shipyard's first ships for the U.S.

Navy — gunboats Nashville, Wilmington, and

Helena — were delivered. 1902—A contract was awarded for the first tanker, W.S. Porter. This vessel was the first of 83 tankers built by the yard. 1926—Nine vessels were launched on March 20: three yachts, one dredge, the passenger liner

Dorchester, three barges, and a car float. The yard was closed because of the multiple launch- ing, deemed "the most unique multiple launch- ing in the noteworthy history of American ship- building." 1933—Ranger, the first U.S. vessel designed and built as an aircraft carrier, was launched. 1942—The shipyard was awarded the Navy "E" pennant for excellence in wartime production. 1945—The shipyard launched the aircraft carri- er Midway (Hull 439) — the first of her class with an armored flight deck. 1952—The passen- ger liner United

States (pictured) which set a trans-

Atlantic speed record that stands today, delivered. 1961—Enterprise, the world's first nuclear- powered aircraft carrier, delivered. 1968—Conglomerate Tenneco purchased

Newport News Shipbuilding on September 4. 1975— Nimitz (CVN 68) the lead ship in its class, delivered. 1996—Newport News Shipbuilding is spun off from Tenneco, once again independent.

January 19, 1999—Newport News

Shipbuilding announces plans to merge with

New Orleans-based Avondale Industries.

Albert L. Bossier, Jr.

The combination of Newport News

Shipbuilding and Avondale Industries will result in a technologically advanced shipbuilding company capa- ble of building any vessel in the Navy fleet.

February, 1999 17