|
Avondale listens to Litton
|
 |
May 11, 1999: 9:08 p.m. ET
New Orleans ship builder says Litton's offer could beat out Newport News bid
|
NEW YORK (CNNfn) - Shipbuilder Avondale Industries Inc. opened the door Tuesday to a possible merger with defense contractor Litton Industries Inc.
The New Orleans company's board voted that Litton's $38-a-share offer could lead to a deal superior to the one it now has to sell to Newport News Shipbuilding Inc. The vote was the first step to considering Litton's offer.
Litton welcomed the news. "Now we have the opportunity to sit down and further our discussions," spokesman Brandon Belote said.
Avondale (AVDL) is well down the path of selling to Newport News (NNS), a fellow shipbuilder that is offering a stock swap of 1.15 to 1.25 of Newport shares for every share of Avondale stock. The sale has already been through one round of comments at the Securities and Exchange Commission and is now under SEC review.
But now it may sell to Litton instead. The terms of the deal state Avondale is free to consider better offers if they come along before the drop-dead date for the sale to Newport News to end, successful or not, in November.
"We're still fully supportive of the merger agreement with Newport News," Avondale spokesman Thomas Kitchen said. The board's vote simply gives Avondale management the go-ahead to talk to Litton (LIT) and see what it has to offer.
The Litton-Avondale talks have an added kink. Litton, a Woodland Hills, Calif.-based defense contractor, has also bid separately to buy Newport News Shipbuilding, Avondale's current suitor. The moves would make Litton a big enough player in marine defense to rival heavyweight General Dynamics Corp.
The Litton-Newport News deal isn't affected by Tuesday's news. But if it is unable to buy Avondale independently, Litton could allow it to merge into Newport News and then consummate a takeover of that company. "They'll take either, or both," Kitchen said.
Litton's $38 offer is worth around $504 million for Avondale's 13.3 million shares outstanding. Avondale closed up 1/8 at 36-1/16 Tuesday. But the day's trading ended before it released the news around 6 p.m. Eastern time.
It's not cut and dry which is the better offer for Avondale. At the middle of the range, giving Avondale shareholders almost 38.50 in Newport stock, Newport's offer was actually a better deal than Litton's at Tuesday's closing prices.
Litton's other bid would give Newport News shareholders 0.55 share of Litton stock for every Newport share they own, a deal worth around $1.9 billion, including $600,000 in debt.
Both Litton, which fell 2-1/4 to 60-1/2, and Newport News closed down Tuesday. Newport finished the day down 1/4 at 32-1/16.
|
|
|
|
|
 |
|
