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Gen Dynamics makes bid
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February 19, 1999: 1:23 a.m. ET
Newport News Shipbuilding is target of $2B cash offer; antitrust an issue
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NEW YORK (CNNfn) - General Dynamics has made an unsolicited bid for Newport News Shipbuilding.
The offer, for $38.50 per share in cash, would be worth some $2 billion.
General Dynamics (GD), a diversified defense manufacturer, confirmed its offer Thursday after it was disclosed by Avondale Industries (AVDL) of New Orleans, which already has a deal to be taken over by Newport News (NNS).
Newport News, describing the terms of its deal with Avondale, said it could not consider another deal "unless, among other things, the Newport News board of directors has determined that the proposal is superior to the merger with Avondale."
Even so, Newport News -- which designs and constructs nuclear powered aircraft carriers and submarines -- took a cautious approach in responding to the General Dynamics bid. "Our board is fully committed to acting in the best interest of its shareholders," said William P. Fricks, chairman and chief executive officer of Newport News.
He pointed out that the Defense Department has scuttled other proposed mergers among military contractors and said there was no assurance that the General Dynamics bid would receive government clearance to proceed.
If Newport News had assurances such a deal might work, then the board would be willing to consider it, Fricks said. "Meanwhile, we remain fully committed to the Avondale transaction."
The Avondale deal, worth about $470 million, was announced in January and is currently undergoing regulatory review. Avondale, a maker of military and commercial ocean-going vessels, said Newport News warned that their planned merger could pose antitrust problems if General Dynamics proceeds with its bid.
"The combination of Avondale and Newport News creates a strong new competitor that can design, build and maintain every ship in the Navy and Coast Guard fleets," Albert L. Bossier, Jr., chairman and chief executive officer of Avondale, said in a prepared statement. "We believe that the combination of Avondale and Newport News offers the best value to the shareholders, customers and employees of both companies."
General Dynamics responded by expressing confidence in its Newport News bid.
"General Dynamics did, in fact, make such an offer," said Nicholas D. Chabraja, General Dynamics' chairman and chief executive officer. "There is a superb strategic fit between Newport News Shipbuilding and General Dynamics, and the proposed merger would benefit the shareholders and employees of both companies, as well as our Navy customer."
While the General Dynamics letter did not specifically ask Newport News to terminate its agreement with Avondale, Newport News officials said the company's proposed acquisition of Avondale would create antitrust problems in a combination of General Dynamics and Newport News.
"We believe the transaction will receive the required regulatory approvals because the combination of our companies would not adversely affect competition in the industry," Chabraja said in a statement.
General Dynamics' stock rose 1-15/16 in Thursday trade to close at 60-1/16.
Newport News shares gained 5/8 to end at 28-7/16.
Avondale stock climbed 7/16 to close at 32-11/16.
From staff and wire reports
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