Douglas Barrie/LONDON
Lockheed Martin has abandoned its attempt to acquire Northrop Grumman, exasperated with US Government opposition to its proposed $8.3 billion deal.
After what has proved to be more than 12 months of fruitless negotiation, Lockheed Martin walked away from the planned acquisition on 16 July, describing the failure as "regrettable".
The US aerospace giant's growth plans ran into trouble when the US Government refused to sanction the acquisition on the grounds that it curtailed competition in the defence aerospace sector. This opposition appears to have halted, for the moment at least, any further large-scale restructuring of the US aerospace and defence industry.
Lockheed Martin and the Department of Defense had been trying to agree an acquisition plan by hiving off contested areas, mainly Northrop Grumman's defence electronics business.
The UK's GEC emerged as a potential bidder for elements of Northrop Grumman which may have had to be divested by Lockheed Martin to make the deal acceptable to the US authorities.
Lockheed Martin chairman Vance Coffman says: "Our inability to reach an acceptable solution, combined with concern over litigation with our principal customer, necessitates this decision."
The collapse of the acquisition could damage Northrop Grumman since, corporately, the company has been in limbo since the merger plan was announced. Chairman Kent Kresa has attempted to put a gloss on the failure. "While we believed the merger was in the best interests of our constituencies, Northrop Grumman can and will continue as a strong, independent competitor in the aerospace marketplace," he says.
Although figures released on 15 July show the company returning a $251 million operating profit, the underlying trend in core business areas, such as subcontract work on the Boeing 747 and building the B-2, is towards significantly reduced income. Some analysts view the collapsed merger as, at best, consigning Northrop Grumman to the second tier of US defence aerospace manufacturers.
Source: Flight International
