Northrop Grumman said it will buy Orbital ATK missile maker in a $7.8 billion cash deal that will give the defense giant access to lucrative government contracts and expand its business.
"Clearly, as we watch what’s happening around our globe, the rather rapid advance of some of our potential adversaries is quite concerning," Northrop Chief Executive Wes Bush said, according to Reuters.
The Los Angeles Times noted that the acquisition would see Orbital shareholders receive $134.50 per share in cash, while Northrop assumes $1.4 billion in net debt.
Bush said that the deal could create new opportunities in areas of space, missiles and missile defense.
"We've had a chance to work directly with Orbital ATK over the years on a variety of programs as partners," he said in a call with analysts, according to the Times. "That has given me a very high level of confidence in the discipline within that organization…. We have seen them perform exceptionally well on everything where we've been partnered."
The deal is expected to close in 2018 and will see Orbital established as a new business sector in Northrop.
Aerospace analyst Loren Thompson said it was not clear what Northrop’s future strategy was.
"What this suggests is they’re making a bigger commitment to space," he said, according to the Times.
Vertical Research Partners analyst Robert Stallard told Reuters that, given that Northrop already operates in the space field, "it is possible that there could be some overlapping activity or increased vertical integration that could prompt regulatory scrutiny."
CNBC reported that news of the deal saw Orbital’s shares jump by more than 19 percent.
It was further noted that Northrop, whose existing sectors are aerospace systems, mission systems and technology services, expected 2017 sales of $29.5 billion to $30 billion on a pro forma basis.
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