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Northrop to buy Newport

Northrop Grumman Corp's planned US$2.6 billion purchase of Newport News Shipbuilding Inc was approved by the US Department of Justice, a week after rival defense contractor General Dynamics Corp. withdrew its bid.

Antitrust regulators closed their investigation of the acquisition, allowing the transaction to move forward, Northrop said in a statement.

The Justice Department sued to block General Dynamics' offer on Oct. 23 because the combination would eliminate competition for nuclear submarines.

Newport News, a maker of submarines and aircraft carriers, agreed to be acquired by General Dynamics on April 25. Northrop matched the offer in May, saying its proposal had a better chance of approval.

The Pentagon, which endorsed the Northrop proposal, had rejected a similar General Dynamics offer in 1999.

Northrop gained the support of Newport shareholders who realized the value of its offer -- about 75 percent of which was to be paid in stock -- increased along with the price of Newport shares after the Sept. 11 terrorist attacks.

Los Angeles-based Northrop and Newport opened talks Oct. 5.

In its offer for Newport, valued at US$67.50 a share, Northrop would determine the exchange ratio by dividing US$67.50 by its average closing share price over a 10-day trading period before an agreement closes. The exchange ratio wouldn't exceed 0.7941176 a share or be less than 0.7105263 a share. The rest would be paid in cash.

Shares of Northrop Grumman rose US$0.21 to US$99.81. Shares Newport News, based in the Virginia city of the same name, rose US$0.35 to US$69.40.
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