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FILED BY NORTHROP GRUMMAN CORPORATION
PURSUANT TO RULE 425 UNDER THE SECURITIES
ACT OF 1933 AND DEEMED FILED PURSUANT TO
RULE 14D-2 OF THE SECURITIES EXCHANGE
ACT OF 1934
SUBJECT COMPANY: NEWPORT NEWS SHIPBUILDING INC.
COMMISSION FILE NO.: 1-12385
[LOGO / NEWS - NORTHROP GRUMMAN]
NORTHROP GRUMMAN CORPORATION
Public Information
1840 Century Park East
Los Angeles, California
90067-2199
Telephone 310-553-6262
Fax 310-556-4561
Contact: Randy Belote (Media) (703) 875-8450
Gaston Kent (Investors) (310) 201-3423
For Immediate Release
NORTHROP GRUMMAN CORPORATION PROPOSES TO ACQUIRE
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NEWPORT NEWS SHIPBUILDING
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Northrop Grumman Offer Would Enhance the Competitive Landscape
of the Military Shipbuilding Industry
Proposed Transaction with General Dynamics
Would Create an Unhealthy Monopoly
Northrop Grumman Bid Has Greater Certainty of Government Approval
LOS ANGELES -- May 9, 2001 -- Northrop Grumman Corporation (NYSE: NOC)
announced today that it has offered to acquire Newport News Shipbuilding
(NYSE: NNS), citing concerns that the previously announced merger agreement
between Newport News and General Dynamics Corporation (NYSE: GD) would
create an unhealthy monopoly, resulting in an unacceptable and
anticompetitive consolidation of the U.S. shipbuilding industry.
The Board of Directors of Northrop Grumman has authorized management
to match General Dynamics' offer of $67.50 per share for all the
outstanding shares of common stock of Newport News, payable 75 percent in
Northrop Grumman stock, the remainder in cash. Northrop Grumman said it
expects to commence an exchange offer shortly, subject to customary
conditions.
In a letter to Newport News Chairman and Chief Executive Officer
William P. Fricks (see attached), Northrop Grumman Chairman, President and
CEO Kent Kresa said that he believes that a "combination of Newport News
and Northrop Grumman (which recently purchased shipbuilder Litton
Industries) would offer a variety of strategic benefits, including
significant cost savings to the U.S. Navy and the opportunity for Newport
News employees to become a part of a larger, more diversified company. In
contrast to General Dynamics' offer, the product portfolios of Northrop
Grumman and Newport News in no way overlap, provide opportunities for
efficiencies, and the combination of our two companies would preserve the
current competitive landscape of the military shipbuilding industry."
Mr. Kresa also said that the "proposed transaction with General
Dynamics raises serious antitrust issues" and, that if permitted to
proceed, "would leave the nation vulnerable with only one nuclear capable
submarine and ship builder." Mr. Kresa also cited a 1999 Department of
Defense analysis that indicated that "over 75 percent of the total shipyard
engineering talent and over 95 percent of the Navy R&D investment would
exist in a combined General Dynamics-Newport News entity." Mr. Kresa added,
"Nothing has changed since that analysis. This would be an unacceptable
position for the U.S. government, the Navy and for Northrop Grumman."
"We believe, and we believe that many already agree, that there is
enormous national security value for America in maintaining, not
eliminating, opportunities for competition between General Dynamics and
Newport News. In short, we believe the General Dynamics-Newport combination
would endanger national security and be costly to both the Navy and the
American taxpayer."
Mr. Kresa said that, "The Board of Newport News has a fiduciary
responsibility to seriously consider our offer, as we believe it provides
superior overall value and greater certainty of completion than the current
merger agreement with General Dynamics."
Northrop Grumman said its cash and stock offer is fully financed. Mr.
Kresa said that he would seek a meeting with Mr. Fricks and Newport News'
Board of Directors to discuss Northrop Grumman's offer.
Northrop Grumman Corporation is a $15 billion global aerospace and
defense company with its worldwide headquarters in Los Angeles. Northrop
Grumman provides technologically advanced, innovative products, services
and solutions in defense and commercial electronics, systems integration,
information technology and non-nuclear shipbuilding and systems. With
80,000 employees and operations in 44 states and 25 countries, Northrop
Grumman serves U.S. and international military, government and commercial
users.
Northrop Grumman's senior management will conduct an investor
conference call today at 6:30 a.m. P.D.T. The call-in number is (952)
556-2827 and the passcode is 5227436. The call will be webcast live on the
Internet in the Investor Relations section of the company's Web site at
www.northropgrumman.com.
THIS PRESS RELEASE IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN
OFFER TO SELL SECURITIES. ANY EXCHANGE OFFER WILL BE MADE ONLY THROUGH A
REGISTRATION STATEMENT AND RELATED MATERIALS. INVESTORS AND SECURITY
HOLDERS ARE STRONGLY ADVISED TO READ THE REGISTRATION STATEMENT AND RELATED
MATERIALS REGARDING THE EXCHANGE OFFER REFERRED TO IN THIS PRESS RELEASE,
IF AND WHEN SUCH DOCUMENT IS FILED AND BECOMES AVAILABLE, BECAUSE IT WILL
CONTAIN IMPORTANT INFORMATION.
ANY SUCH REGISTRATION STATEMENT WOULD BE FILED BY NORTHROP GRUMMAN WITH THE
SECURITIES AND EXCHANGE COMMISSION (SEC) AS PART OF A TENDER OFFER
STATEMENT. INVESTORS AND SECURITY HOLDERS MAY OBTAIN A FREE COPY OF THE
REGISTRATION STATEMENT (IF AND WHEN FILED AND AVAILABLE) AND OTHER RELEVANT
DOCUMENTS ON THE SEC'S WEB SITE AT WWW.SEC.GOV. ANY SUCH REGISTRATION
STATEMENT AND RELATED MATERIALS MAY ALSO BE OBTAINED FOR FREE BY DIRECTING
SUCH REQUESTS TO NORTHROP GRUMMAN.
Note: Certain statements and assumptions in this release contain or are
based on "forward-looking" information (that the company believes to be
within the definition in the Private Securities Litigation Reform Act of
1995) and involve risks and uncertainties. Such "forward-looking"
information includes the statements above as to the impact of the proposed
acquisition on revenues and earnings. Such statements are subject to
numerous assumptions and uncertainties, many of which are outside the
company's control. These include the company's ability to successfully
integrate the operations of Litton, assumptions with respect to future
revenues, expected program performance and cash flows, the outcome of
contingencies including litigation, environmental remediation, divestitures
of businesses, and anticipated costs of capital investments. The company's
operations are subject to various additional risks and uncertainties
resulting from its position as a supplier, either directly or as
subcontractor or team member, to the U.S. Government and its agencies as
well as to foreign governments and agencies; actual outcomes are dependent
upon factors, including, without limitation, the company's successful
performance of internal plans; government customers' budgetary restraints;
customer changes in short-range and long-range plans; domestic and
international competition in both the defense and commercial areas; product
performance; continued development and acceptance of new products;
performance issues with key suppliers and subcontractors; government import
and export policies; acquisition or termination of government contracts;
the outcome of political and legal processes; legal, financial, and
governmental risks related to international transactions and global needs
for military aircraft, military and civilian electronic systems and support
and information technology; as well as other economic, political and
technological risks and uncertainties and other risk factors set out in the
company's filings from time to time with the Securities and Exchange
Commission, including, without limitation, the company's reports on Form
10-K and Form 10-Q.
# # #
[LOGO - NORTHROP GRUMMAN]
NORTHROP GRUMMAN CORPORATION
1840 Century Park East
Los Angeles, California
90067-2199
Telephone 310-553-6262
May 8, 2001
Mr. William P. Fricks
Chairman and Chief Executive Officer
Newport News Shipbuilding Inc.
4101 Washington Avenue
Newport News, VA 23607-2770
Dear Bill,
We were disappointed by your April 25th announcement that Newport News had
agreed to be acquired by General Dynamics for cash without exploring
alternatives with Northrop Grumman. Moreover, we believe your proposed
transaction with General Dynamics raises serious antitrust issues. As the
Department of Defense previously noted, over 75% of the total shipyard
engineering talent and over 95% of the shipbuilding Navy R&D investment
would exist in a combined General Dynamics-Newport News entity.
Furthermore, this combination would leave the nation vulnerable to only one
nuclear capable submarine and shipbuilder.
While you stated that a nuclear "monopoly" already exists due to your
recent history of Navy approved "teaming" with General Dynamics (your only
nuclear capable competitor), we believe, and we believe many already agree,
that there is enormous national security value for the United States in
maintaining, not eliminating, competition. In short, we believe the General
Dynamics-Newport News combination would eliminate competition, endanger
national security and be costly both to the Navy and to the American
taxpayer.
A business combination between Northrop Grumman and Newport News, on the
other hand, should receive regulatory approval, and will be of greater
benefit to your stockholders and other constituencies than would your
current agreement with General Dynamics. Our Board of Directors has
authorized me to advise you that we will match General Dynamics' offer of
$67.50 per share for all the outstanding shares of Common Stock of Newport
News, comprised 75% of Northrop Grumman common stock with the remainder in
cash. We expect to commence an exchange offer shortly, subject to customary
conditions.
We have great respect for Newport News' management team and expect that it
would be well-represented in the senior management ranks of the combined
shipbuilding business, including mutually agreed upon possible Board
representation. A combination of Newport News and Northrop Grumman would
offer a variety of benefits, including significant cost savings to the Navy
and the opportunity for Newport News' employees and communities to become
part of a larger, more diversified defense company.
Northrop Grumman believes its proposal is superior to the General Dynamics
offer for the following reasons:
a) Certainty of Completion. Northrop Grumman can provide Newport
News shareholders with greater certainty of completion than the
current merger agreement with General Dynamics. As previously
mentioned, the General Dynamics combination would create a
monopoly for submarines and naval nuclear propulsion. The
combination would result in a significant majority of U.S. Navy
ship-related revenues and nearly all of the Navy-related
shipbuilding R&D in a single company. In contrast, the businesses
of Northrop Grumman and Newport News, while not overlapping, do
provide opportunities for efficiencies, and the combination of
our two companies would preserve the current competitive
landscape of the military shipbuilding industry.
b) Superior Overall Value. Our proposal provides Newport News
shareholders with the opportunity to retain an equity interest in
one of the industry's leading diversified defense electronics,
systems integration, information technology and shipbuilding
enterprises with significant market capitalization and potential
for further appreciation. Our proposal provides Newport News
shareholders with the opportunity to elect the consideration of
their choice (i.e., cash, Northrop Grumman common stock or a
combination of both) and exchange their shares for Northrop
Grumman common stock on a tax-free basis, providing superior
value to General Dynamics' taxable transaction.
Our company's extensive experience in reviewing acquisition opportunities
gives us the ability to conduct an efficient and expeditious due diligence
process. We are prepared to move quickly in completing any potential
transaction in an effort to meet any reasonable time schedule established
by you and are prepared to negotiate a merger agreement consistent with the
structure of our proposal on terms substantially similar to your agreement
with General Dynamics. As such, your Board of Directors should be aware
that, once we have completed due diligence, we will be prepared to enter
into negotiations immediately with respect to all aspects of our proposal.
Our offer is a fully financed, cash and stock offer for all Newport News
shares. As a company with $15 billion in revenues, an investment grade
credit rating, a market capitalization of $8 billion and 80,000 employees,
Northrop Grumman clearly has the financial wherewithal to consummate a
transaction with Newport News. Accordingly and consistent with the terms of
your merger agreement with General Dynamics, we believe the Board of
Directors of Newport News has a fiduciary obligation to provide its
shareholders with the opportunity to consider and take advantage of our
offer. We trust that you will not take any action that would prevent
shareholders from having a full opportunity to consider our offer.
We are convinced this transaction is truly a "win-win" opportunity for
Newport News shareholders, employees, customers and is in the national
interest. Our objective is a transaction that has the full support of you
and the Newport News Board of Directors, as well as your employees,
shareholders and many loyal customers and suppliers. We believe your Board
of Directors will conclude, after considering all the factors and
information available, that this offer is a Superior Proposal as defined in
your agreement with General Dynamics. Accordingly, we will take the liberty
of contacting you shortly to discuss the merits of this offer and arrange
for a meeting.
Sincerely,
/s/ Kent Kresa
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Kent Kresa
Chairman, President and CEO
Northrop Grumman Corporation