TRW blocks Northrop Grumman takeover

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Posted 9:41AM on Saturday, May 4, 2002

LYNDHURST, OHIO - TRW Inc. shareholders on Friday blocked Northrop Grumman Corp.'s $6.7 billion hostile takeover attempt of the company, rejecting the defense contractor's bid to acquire more than 20 percent of TRW's shares. Northrop Grumman officials said they will announce on Monday whether the company will extend its $53 per share offer, which expires Friday night. Both sides met Thursday night and again after the special shareholder vote Friday to discuss Northrop Grumman's offer. Under Ohio's tough anti-takeover laws, Northrop Grumman cannot buy more than 20 percent of TRW's stock without permission of stockholders. A vote total was not immediately available, but TRW Chairman Philip Odeen said, ``I would characterize it as a clear cut victory.'' Ohio's 1982 Control Share Acquisition Act and the 1990 Business Combination Statute limits outside parties from buying shares that would allow them to oust a target company's board of directors. Northrop Grumman has challenged the laws in a lawsuit pending in federal court. Los Angeles-based Northrop Grumman has been trying to go directly to TRW shareholders since the suburban Cleveland company's board twice rejected its bids as inadequate. Both companies spent weeks furiously soliciting support from shareholders and engaging in public relations campaigns. Northrop Vice President Al Myers told shareholders before the vote that approval of the measure was critical to keep Northrop Grumman's takeover attempt alive. But Brett Hoselton, senior automotive analyst for McDonald Investments, said the vote has little effect on Northrop Grumman's bid. ``The vote still leaves the possibility that Northrop comes back and makes another offer,'' Hoselton said. ``The only thing that it does is it potentially sends the message to Northrop Grumman that $53 is in inadequate offer.'' But if Northrop Grumman announces Monday that it is dropping out of the bidding, that could cause TRW's stock to drop and open the door for Northrop Grumman to reinstate its bid, Hoselton said. ``There is clearly a lot of game-playing going on,'' he said. TRW is a large, diverse company involved in aerospace, defense, automotive parts and information technology. Northrop Grumman has said it would sell off TRW's auto parts business. TRW has proposed its own split-up plan that its board has said would be worth more than Northrop Grumman's current offer. Northrop Grumman has said it could revise its offer, but only if it obtains complete access to TRW's financial records. TRW has said it has offered to open its books to Northrop Grumman, but Northrop officials say TRW has set unacceptable limits that would prevent Northrop Grumman from making additional bids directly to the shareholders. TRW shares fell 80 cents to $55 in trading Friday on the New York Stock Exchange. Northrop Grumman shares dropped $1.02 to $122.38.