Litton Industries, Inc. Makes Separate Proposals to Acquire Newport News Shipbuilding and Avondale Industries, Inc.
;WOODLAND HILLS, Calif. --- Litton Industries, Inc. today announced that it has sent letters to the chairmen and chief executive officers of Newport News Shipbuilding and Avondale Industries, Inc. proposing to acquire Newport News Shipbuilding in a stock-for-stock merger that would be valued at $35.61 per Newport News Shipbuilding share, based on May 6, 1999 closing price of $64.75 for Litton Industries, Inc.'s common stock, and Avondale Industries, Inc. for $38.00 per share in cash. The two transactions are valued at $2.4 billion in the aggregate, including assumption of debt. Neither offer is conditioned upon the acceptance of the other offer. ;When combined with Litton Industries, Inc.'s Ingalls Shipbuilding operations, Newport News Shipbuilding and Avondale Industries, Inc. would create a worldwide leader in the shipbuilding industry and a full-service contractor with the ability to compete across the spectrum of the U.S. Navy's shipbuilding needs. The proposal would benefit employees, suppliers and customers through the formation of a dynamic, global competitor for commercial and government business. Market capitalization of the combined company would be approximately $6.5 billion ($4.3 billion in equity and $2.2 billion in debt). Based on latest twelve months results, the combined company would have revenues of approximately $7.4 billion, earnings before interest, taxes, depreciation and amortization (EBITDA) in excess of $800 million, and more than 58,000 employees. ;Litton Industries, Inc. is proposing to acquire Newport News Shipbuilding in a tax-free, stock-for-stock transaction in which each share of Newport News Shipbuilding common stock would be converted into .55 shares of Litton Industries, Inc. common stock. Based on the May 6, 1999 closing price of $64.75 per Litton Industries, Inc. share, the offer values Newport News Shipbuilding at $1.9 billion, including the assumption of approximately $600 million in debt. This represents a premium of 32% over the May 6, 1999 closing price for Newport News Shipbuilding common stock. The transaction will be accounted for as a pooling of interests. ;Litton Industries, Inc.'s all-cash proposal to Avondale Industries, Inc. is valued at approximately $500 million in the aggregate. This represents a premium of 20% over May 6, 1999 closing price for Avondale Industries, Inc. common stock. The Avondale Industries, Inc. transaction, which would be effected through a merger, is not subject to any financing contingency. The combined transaction is expected to be accretive to earnings in the first year. ;Michael R. Brown, chairman and chief executive officer of Litton Industries, Inc., said, "Our proposed transactions provide superior value to the stockholders of both Newport News Shipbuilding and Avondale Industries, Inc. When combined with our highly efficient Ingalls Shipbuilding business, this triumvirate would create a world-class leader in shipbuilding. We offer a significant premium, especially when compared with the market's valuation of the proposed merger between Avondale Industries, Inc. and Newport News Shipbuilding. The U.S. Navy and our other customers would benefit from the long term savings and innovative, cost-effective solutions; employees would form a powerful new team; and shareholders would benefit from a company that is more efficient and better positioned to compete. ;"The proposal also fits perfectly with Litton Industries, Inc.'s corporate strategy of sustaining a strong balance sheet, maintaining diversified sources of revenue, and redeploying its substantial cash flow to accelerate growth in earnings and revenues,'' Mr. Brown continued. "We are, however, prepared to proceed with either Newport News Shipbuilding or Avondale Industries, Inc. independently if they so choose. ;"We have had preliminary discussions with the Department of Defense about our proposals, and we are well aware of the considerations that led to the rejection of the proposed combination between General Dynamics and Newport News Shipbuilding,'' Mr. Brown said. "In that case, DOD was concerned with the potential concentration of R&D expenditures in one company and the impact of consolidation upon competition. Our approach enhances competition and ensures that the benefits of R&D are available to multiple competitors and companies that team with them. ;"Upon completion of these transactions, the U.S. shipbuilding industry would continue to offer alternative suppliers to the Navy in both nuclear and non-nuclear categories. We believe that the DOD will find both offers to be in best interests of the nation, the shipbuilding industry and the local communities involved. ;"Litton Industries, Inc. has been a leading shipbuilder for more than 30 years, and we know that much of our success is rooted in our commitment to the communities in which we operate,'' Mr. Brown said. "We pride ourselves on being good corporate citizens and responsible community members, and we intend to continue that tradition with the Newport News Shipbuilding and Avondale Industries, Inc. families.'' ;Litton Industries, Inc. is being advised by Merrill Lynch & Co., Inc. and the company's legal counsel is Wachtell, Lipton, Rosen and Katz.
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Litton Industries, Inc. Makes Separate Proposals to Acquire Newport News Shipbuilding and Avondale Industries, Inc.
