- The Washington Times - Thursday, June 7, 2001

NORFOLK (AP) The board of directors of Newport News Shipbuilding Inc. voted to support General Dynamics Corp.'s $2.1 billion acquisition offer but took no position on a similar counterbid by Northrop Grumman, the Navy shipbuilder said yesterday.
The board unanimously reaffirmed its recommendation of the General Dynamics offer of $67.50 per share in cash for all outstanding shares of Newport News common stock and that shareholders tender their shares to General Dynamics, the company said.
The board believes the General Dynamics offer provides better and more certain value for Newport News stockholders, the company said. The Northrop offer contained a combination of cash and stock.
The board determined that it cannot take a position on Northrop Grumman's offer until it gets more information about the positions of the Defense and Justice departments on both offers, the company said.
Northrop Grumman has said its offer stands a better chance of being approved by federal regulators because it would prevent one company from controlling all the nation's nuclear shipyards. But the Newport News board said it cannot reach that conclusion, based on the information currently available.
"We will seek to determine the position of the U.S. government regarding these two offers as expeditiously as possible," Newport News Chairman and Chief Executive Officer Bill Fricks said in a statement. "The primary interest of the board of directors is for our stockholders to receive the best value for their shares in any acquisition of Newport News Shipbuilding."
Newport News spokeswoman Jerri Fuller Dickseski said the board did not reject Northrop's offer, but analysts said the board's action amounted to a rejection.
"They rejected Northrop but they didn't say so in so many words," said defense analyst Thomas Meagher of BB&T; Capital Markets, a Richmond-based investment bank. "They were trying to be nice about it. This is definitely a 'yes' to GD, no doubt about it."
Mr. Meagher said General Dynamics is likely to prevail in part because its offer is all cash. In addition, he said people in the industry are questioning where Northrop would get the money for its bid because it recently acquired shipmaker Litton Industries Inc., and whether Northrop really wanted to buy Newport News or just undermine General Dynamics' bid.
Paul Nisbet, a defense industry analyst with JSA Research of Newport, R.I., said the General Dynamics deal seems to be well on its way to completion.
"What Newport News is saying here is that, absent any information to the contrary from the government regulators, they'll favor the GD offer," Mr. Nisbet said. "But they leave the caveat that the government may choose to interfere, in which case they will have to reconsider" Northrop Grumman's bid.
A General Dynamics-Newport News merger was scuttled two years ago after Clinton administration Defense Secretary William S. Cohen said it would stifle competition. But Mr. Nisbet doubts Northrop Grumman will be able to persuade the Bush administration to have similar concerns.
President Bush, Vice President Richard B. Cheney and Defense Secretary Donald H. Rumsfeld are "businessmen instead of bureaucrats," Mr. Nisbet said. "They will be inclined, if they can, to let matters resolve themselves in the marketplace rather than imposing conditions on deals of this sort."
Randy Belote, a spokesman for Northrop Grumman, said the company is disappointed but undeterred and plans to take its case to Newport News' stockholders.
"We believe our offer is clearly superior and does not create a monopoly, and therefore has a greater probability of gaining regulatory approval," Mr. Belote said.
General Dynamics and Newport News officials have said a merger would streamline management and save money for the Navy, and there would be no antitrust issues because the companies already cooperate on nuclear submarine construction.
Newport News designs and builds nuclear-powered aircraft carriers and submarines for the Navy and services ships in the Navy fleet.
General Dynamics, based in Falls Church, offered to buy the Newport News, Va., shipyard on April 25, and Northrop's offer came two weeks later.
Los Angeles-based Northrop Grumman, General Dynamics' primary competitor for Navy shipbuilding contracts, also offered $2.1 billion, giving Newport News shareholders the opportunity to sell their shares for $67.50 each or exchange them for shares of Northrop Grumman.
On Monday, General Dynamics extended its pending offer for shares of Newport News Shipbuilding until June 22 from June 1.

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