Page 20: of Maritime Reporter Magazine (January 2001)

Northrop Grumman To Acquire Litton Industries For $5.IB

In a move which effectively creates a defense and marine naval construction giant, Northrop Grumman

Corp. and Litton Industries jointly announced late last month that they have signed a definitive agreement under which Northrop Grumman will acquire for cash all of the outstanding shares of Litton for $80 per com- mon share and $35 per Series B Preferred share. The transaction is valued at approximately $5.1 billion, which includes the assumption of Litton's $ 1.3 billion in net debt.

Litton is a leading supplier of advanced electronics and information systems to the U.S. government and international customers and is the premier designer and builder of non-nuclear surface combatant ships for

U.S. and foreign navies. The company reported sales of $5.6 billion and net income of $218 million for the 2000 fiscal year ended July 31. Litton had $8.2 billion in fully funded backlog at the end of its first quarter,

October 31, 2000.

Kent Kresa, Northrop Grumman's chairman, presi- dent and chief executive officer said, "We are very pleased with our strategic acquisition of Litton, which we believe brings tremendous value to the sharehold- ers, employees and customers of both companies. With projected combined pro forma revenues of more than $15 billion in 2001, growing to $18 billion by 2003, this acquisition solidly places Northrop Grumman among the world's top-tier defense companies and strengthens our commitment to systems integration, defense electronics and information technology."

Mr. Kresa added that, "Litton gives us a new core competency as a major prime contractor and systems integrator of surface ships for the U.S. Navy. Following the close, Northrop Grumman will be one of the coun- try's largest federal IT suppliers and our defense elec- tronics business will heighten our status as a premier systems and sensor integration leader by expanding into navigation and guidance systems for airborne plat- forms and other military avionics systems. The acqui- sition also significantly broadens our portfolio of busi- nesses."

Grumman's and Litton's boards of directors have unanimously approved the transaction.

Following the close of the transaction, it is Northrop

Grumman's intention to raise additional capital through a stock offering.

During and after the initial transition period, Litton will be operated as a wholly owned subsidiary of

Northrop Grumman. Dr. Ronald D. Sugar, currently

Litton's president and COO, will become a Northrop

Grumman corporate vice president, and president and

CEO of the new Litton subsidiary. "I am pleased that we were able to work with

Northrop Grumman to create this combination, which brings together two premier advanced technology com- panies and generates a broad range of opportunities going forward," said Michael R. Brown, Litton's chairman and CEO. "The combination creates out- standing value for Litton and Northrop Grumman shareholders, customers and employees."

The transaction, which is expected to close within the first quarter of 2001, is subject to review under the

Hart-Scott-Rodino Act as well as other governmental and regulatory agencies. The transaction will be struc- tured as a cash tender offer that will be initiated on Jan- uary 5, 2001, for all the outstanding stock of Litton.

Northrop Grumman, based in Los Angeles, is a high technology company providing innovative solutions in systems integration, defense electronics and informa- tion technology for its U.S. and international military, government and commercial customers, as a prime contractor, principal subcontractor, team member or preferred supplier. The company expects to report sales of approximately $7.6 billion for 2000 and has more than 39,000 employees in three major sectors at sites in 43 states and various international locations.

Litton designs, builds and overhauls surface ships for government and commercial customers worldwide and is a leading provider of defense electronics and infor- mation technology services and support to the U.S. government and international customers. The company also provides specialized IT services to both commer- cial and government customers at the local, national and international level. Headquartered in Woodland

Hills, Calif., Litton has more than 40,000 employees in four major business units at facilities in 29 states and other locations worldwide.

Salomon Smith Barney acted as principal financial advisor to Northrop Grumman in this transaction.

Goldman Sachs & Co. also provided transaction advice and a fairness opinion. To complete the transaction,

Northrop Grumman has received financing commit- ments totaling $6 billion from Credit Suisse First

Boston and The Chase Manhattan Bank. Litton was advised by Merrill Lynch & Co.

Corporate Bio: Kent Kresa

Kent Kresa was elected president of Northrop Grum- man in 1987, CEO in January 1990 and chairman in

September 1990. Kresa joined Northrop Grumman in 1975 as vice president and manager of the company's

Research and Technology Center, developing new pro- prietary processes and products for the company. From 1976-82 he served as corporate vice president and gen- eral manager of the Ventura Division, a leader in the production of unmanned aeronautical vehicles. In 1982, he was appointed group vice president of the company's

Aircraft Group and in 1986 was named senior vice pres- ident-Technology Development and Planning.

Before joining Northrop Grumman, Mr. Kresa served with the Defense Advanced Research Projects Agency, where he was responsible for broad, applied research and development programs in the tactical and strategic defense arena. From 1961-68 he was associated with the Lincoln Laboratory at the Massachusetts Institute of

Technology (M.I.T.), where he worked on ballistic mis- sile defense research and reentry technology.

In 1996, Mr. Kresa was named the California Industrial- ist of the Year by the California Museum of Science and

Industry and the California Museum Foundation, and received the Bob Hope Distinguished Citizen Award from the National Security Industrial Association. In 1995, he received the Navy League of New York's

Admiral John J. Bergen Leadership Award and was named 1994 Executive of the Year by the Los Angeles

Business Journal. The Air Force Association presented him with its John R. Alison Award for Industrial Lead- ership in 1994. He also received the U.C.L.A. School of

Engineering Citation Award in 1990.

Litton — with a fully funded $8.2 billion in backlog — is the premier designer and builder of non-nuclear surface combatant ships for U.S. and foreign navies.

Pictured is Roosevelt, the premiere Ingalls- built Flight IIA destroyer, a variant of the

Burke Class with full up helo facilities. 20 www.maritimetoday.com Maritime Reporter & Engineering News