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Northrop moving on
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July 17, 1998: 7:43 p.m. ET
Company insists it has plans for future; merger speculation continues
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NEW YORK (CNNfn) - One day after its planned merger with Lockheed Martin Corp. fell apart, Northrop Grumman Corp. spent Friday trying to convince Wall Street it has its sights on the future.
On Friday, Northrop Chairman Kent Kresa said although the merger with Lockheed was a sound plan, his company was never dependent on the deal going through.
"We believed that the merger with Lockheed Martin made excellent strategic sense, saved our customers a lot of money and served in the best interest of all parties. Nevertheless, we have always believed our future was not dependent on this or any other merger," he said in a conference call.
Kresa said Northrop was not seeking another suitor.
Lockheed announced late Thursday it was scrapping the plan after it was unable to reach an agreement with federal antitrust regulators, who had sought to block the plan.
With the breakup came speculation that European companies may some come calling to Northrop. However, a partnership with an overseas firm would be complicated since the company handles sensitive military projects. That's the main reason the Pentagon opposed the original deal.
Appearing Friday on "The Moneyline News Hour With Lou Dobbs," Kresa said the company's future remains bright despite the setback.
"Before the interest in the company by Lockheed-Martin, we had a very good strategy. We were growing and we were not for sale.
"We will not only survive, but thrive. We have a company that's growing from about $9 billion [in revenues] to $12 billion by 2002. That's good internal growth," he said.
Shares of British Aerospace PLC jumped Friday on speculation it could be involved in a future deal as did the General Electric Co. PLC. The London-based conglomerate manufactures everything from generators and high-speed trains to defense electronics. It has no connection with the American company of the same name.
If the Lockheed deal had gone through, many were speculating they would have been forced to sell off some of their electronics businesses to satisfy the Pentagon. GEC and BAe were seen as ideal candidates to get those businesses.
However, analysts say the disappointment was unfounded since Lockheed (LMT) would not have sold those units. They said those portions were the very reason it sought to buy the company.
"It's difficult to perceive what would have been available to European companies. ... I think there has been too much excitement on that score," Howard Wheeldon of Matheson Investment told Reuters.
Wheeldon said Northrop (NOC) now faces an important decision: whether to become a supplier of defense electronics to U.S. businesses and sell all other assets or take that business global and seek a European partner.
"Being part of a major company with a European base like [Britain's] General Electric could be a very attractive step in developing that action."
Shares of Northrop tumbled 6-3/4 to 90-5/8 Friday while Lockheed shares gained 1-1/2 to 105-7/16.
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