Grumman Asks Northrop to Abide By Closed Auction Rules
Mar. 31, 1994
NEW YORK (AP) _ Northrop Corp., seeking to force Grumman Corp. to sell itself in an open auction, proposed sweetening its bid for the defense contractor to $62 per share, or $2.11 billion.
But Grumman on Wednesday rejected the proposed offer and said it would stick to auction rules calling for Northrop and rival Martin Marietta Corp. to submit sealed bids by 5 p.m. EST today.
''The board, including myself, very much hopes that you will participate in the bidding procedure,'' Grumman chairman Renso Caporali said in a letter to Northrop.
The deadline isn't firm, however. Grumman has said it would change the rules, including the deadline, to meet its obligation to seek the best deal for shareholders.
Northrop spokesman Tony Cantafio said the company was ''sorry the Grumman board elected not to have an open and public bidding process for their shareholders. ... We're continuing to review our options.''
With Grumman rejecting the new offer, Northrop's bid reverts to an earlier $60-per-share, or $2.04 billion, offer. Northrop could leave its bid at $60, then raise its offer if Martin Marietta countered. Martin Marietta has offered $55 a share or $1.93 billion.
The adviser to Grumman's largest single shareholder - an employee trust fund that owns 30 percent of the Bethpage, N.Y.-based company - endorsed Northrop's proposed offer of $62 a share.
The adviser, Rothschild Inc. senior managing director Wilbur Ross, said Grumman should get Martin Marietta to at least match $62 per share.
What initially looked like a friendly $1.93 billion takeover of Grumman by Martin Marietta has turned hostile, a rare occurance in the defense industry, in mid-March when Northrop intervened with its higher offer.
Northrop's determination to buy Grumman is a further sign of defense contractors' need to build up their most profitable businesses as Pentagon spending dwindles.
Northrop has its eye on the Grumman's defense electronics products such as the JSTARS aircraft-borne radar system. Los Angeles-based Northrop makes the B-2 stealth bomber and has said the two products make the companies a natural fit. Grumman was once the premier maker of Navy aircraft.
Bethesda, Md.-based Martin Marietta, meanwhile, has already finished much of its consolidation in the rocket business by purchasing GE Aerospace and the General Dynamics space launch division.
Although Northrop chairman Kent Kresa rejected Grumman's auction procedure, Northrop appeared to be trying to stay within the auction rules by merely proposing a higher offer. The guidelines prohibit the companies from revealing their final offers before Monday.
Martin Marietta has been mostly quiet since Northrop made its $60-a-share offer, saying it would respond ''in an appropriate manner at the appropriate time.'' Martin Marietta said through a spokesman that the company had no immediate response to Northrop's action Wednesday.