Northrop Grumman To Buy Orbital ATK In $9.2 Bln Cash, Debt Deal

(RTTNews) - Defense contractor Northrop Grumman Corp. (NOC) Monday said it has entered into a definitive agreement to buy Orbital ATK, Inc. (OA), an aerospace and defense technologies company, for approximately $9.2 billion. The consideration comprises $7.8 billion in cash, plus the assumption of $1.4 billion in net debt.

In pre-market activity on the NYSE, Orbital ATK shares were gaining around 20 percent to $131.50.

In the deal, Orbital ATK shareholders will receive all-cash consideration of $134.50 per share. The agreement has been approved unanimously by the Boards of Directors of both companies.

Northrop Grumman expects the transaction to be accretive to earnings per share and free cash flow per share in the first full year after the deal closes, and to generate estimated annual pre-tax cost savings of $150 million by 2020.

The acquisition is expected to close in the first half of 2018 and is subject to customary closing conditions, including regulatory and Orbital ATK shareholder approval.

Orbital provides space rocket motors and other parts for offensive and defensive missile systems, as well as satellites for military and commercial space operations. It was formed in 2015 from the merger of two missile and space specialists, Alliant Techsystems and Orbital Sciences. Orbital ATK employs about 13,000 and is targeting sales this year of $4.6 billion.

Upon the deal closure, Northrop Grumman plans to establish Orbital ATK as a new, fourth business sector to ensure a strong focus on operating performance and a smooth transition.

On a pro forma 2017 basis, Northrop Grumman expects to have sales in the range of $29.5 to $30 billion based on current guidance.

The Wall Street Journal had reported Sunday, citing people familiar with the matter, that Northrop Grumman was nearing a deal to buy Orbital ATK for more than $7.5 billion.

Wes Bush, chairman, chief executive officer and president of Northrop Grumman, said, "The acquisition of Orbital ATK is an exciting strategic step as we continue to invest for profitable growth. … Our complementary portfolios and technology-focused cultures will yield significant value creation through revenue synergies associated with new opportunities, cost savings, operational synergies, and enhanced growth."

Northrop Grumman has received fully committed debt financing and expects to put in place permanent financing prior to closing.

In the deal, Perella Weinberg Partners LP is acting as exclusive financial advisor to Northrop Grumman, while Citigroup is acting as exclusive financial advisor to Orbital ATK.