- The Washington Times - Thursday, April 18, 2002

TRW Inc. yesterday rejected Northrop Grumman's most recent hostile-takeover bid, but opened the door to letting bidders view its internal financial records.
The Cleveland-based defense contractor called Northrop's offer of $53 per share (or about $12.1 billion) "financially inadequate" and said it would continue to work on its own internal plan to provide greater shareholder value.
Analysts said the move yesterday to open financial records was a sign TRW may not be able to prevent its shareholders from voting in favor of the takeover.
Los Angeles-based Northrop has said its $53 per-share offer was contingent on TRW opening its books for review. TRW said yesterday it would allow review of nonpublic financial records, but said it did so to allow advisers and other companies to explore ways to create shareholder value greater than what Northrop has offered.
TRW shareholders are scheduled to vote on the takeover plan on Monday. TRW's board is trying to delay that vote, arguing that its shareholders have not had enough time to review the offer, which was issued on April 14.
Any group wishing to view TRW's internal financial records will be asked to sign a confidentiality agreement. TRW said it has been contacted by several companies other than Northrop. A spokesman declined to elaborate.
Analysts said it was not clear whether TRW was opening the door to an auction between rival companies. Though companies have contacted TRW, there have been no reports of competing offers. Analysts said Lockheed Martin and Boeing, the two companies seen as best positioned to enter the fray, would face tough federal antitrust scrutiny.
But analysts said TRW would probably welcome a bidding war.
"I'm sure they would love it," said Paul Nisbet, an analyst with JSA Research in Newport, R.I. "If they're going to go, they might as well go at a high price."
If Northrop were to succeed in its attempt to take over TRW, it would rival Bethesda-based Lockheed Martin as the largest U.S. defense contractor, and become a top player in the areas of space and missile defense. It is already the world's largest military shipbuilder, after completing its acquisition of Newport News Shipbuilding on April 1.
TRW, the No. 2 manufacturer of automotive air bags, had previously rejected Northrop's original offer of $47 per share, made Feb. 21.
A vote by TRW's shareholders to allow Northrop access to TRW's internal books is still set for April 24, even after yesterday's announcement.
"We are urging TRW shareholders to keep the pressure on by voting for our proposals," said Northrop spokesman Frank Moore.
Mr. Moore said Northrop has not seen a copy of the confidentiality agreement required for access to TRW's records, and is waiting to review any conditions of TRW's plan.
In a conference call announcing first-quarter earnings yesterday, TRW's interim Chairman Phil Odeen said Northrop's offer undervalued the company's space and defense businesses, and offered no premium for potential cost-savings from the purchase.
"We view this revised offer as recognition on Northrop's part that their earlier offer was grossly inadequate," he said.
TRW said it will spin off its auto-parts business and sell its aeronautics business as part of a restructuring plan designed to give its shareholders greater value than Northrop's offer.
TRW said yesterday it expects a yearly profit of $3.55 to $3.60 per share, or about 30 cents per share more than the average estimate by analysts surveyed by Thomson/First Financial. The company said first-quarter profits rose from $78 million, or 62 cents per share, to $91 million, or 71 cents per share, from the same quarter a year ago.
Meanwhile, Northrop reported first-quarter profits of $149 million, or $1.27 per share, up 45 percent from $103 million, or $1.42 per share, a year ago.
Shares of Northrop Grumman fell yesterday $2.86 to close at $113.88 on the New York Stock Exchange. Shares of TRW Inc. rose $1.47 to close at $53.85, its highest price in nearly two years.

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