GRAHAM WARWICK / WASHINGTON DC
TRW offers alternative plan to shareholders to spin off automotive business and accelerate debt-cutting efforts
Northrop Grumman has hinted at an improved offer after TRW again rejected its $5.9 billion unsolicited take-over bid and announced plans to spin off its automotive business and possibly sell its Aeronautical Systems unit, which includes Lucas Aerospace. TRW has scheduled a shareholders meeting for 22 April to vote on the offer.
TRW says the $47 a share offer is "grossly inadequate" and under-values the company's businesses. Northrop Grumman has indicated it could improve the offer if TRW agrees to begin negotiations and provides access to information on the company. "TRW continues to deny us access to information that could support its claim that an offer of greater value is warranted," says chairman and chief executive Kent Kresa.
In a bid to persuade its shareholders to reject the Northrop Grumman offer, TRW has announced plans to spin off its automotive business within six to nine months. The company will also accelerate its debt-reduction efforts and plans to cut its $5 billion of debt by up to $2 billion this year, mainly through asset sales. TRW is in "preliminary negotiations" to sell its Aeronautical Systems unit, which had sales of $1.1 billion last year. Analysts estimate the unit should sell for around $1.3 billion.
TRW chairman and interim chief executive Philip Odeen says the plan would give shareholders stakes in two "pure-play" companies with leading positions in the automotive and defence markets. The automotive business, with sales last year of $10.1 billion, produces seatbelts, airbags and anti-lock brakes. The defence business, which would have sales around $5 billion, includes satellites, communications systems, high-energy lasers and information systems.
Kresa says the Northrop Grumman offer "has a higher degree of certainty, can be rapidly completed and poses far less risk" than the plan unveiled by TRW. The company plans to take on all of TRW's aerospace business and immediately sell or spin off the automotive business.
Rival bids from Boeing or Lockheed Martin are considered unlikely because of Department of Defense concerns, and Raytheon says it is not interested in TRW. US industry leaders doubt the Bush Administration would view a BAE Systems bid favourably, while General Dynamics and Honeywell, cited as potential bidders, have yet to make any public moves.
Odeen says TRW has received "unsolicited indications of interest from third parties" for each of its businesses and is in preliminary negotiations on transactions involving its automotive business and Aeronautical Systems unit.
Source: Flight International
