NG vies with GD for Newport News

Sea Power, Jun 2001

Two weeks after General Dynamics (GD) announced its intention to purchase Newport News Shipbuilding (NNS), a relative newcomer to shipbuilding--Northrop Grumman (NG)--has challenged the merger with a merger offer of its own.

General Dynamics--owner of Bath Iron Works, Electric Boat, and National Steel & Shipbuilding Company--signed a merger agreement on 25 April with NNS, the Navy's sole supplier of nuclear-powered aircraft carriers. If approved, the merger would make General Dynamics the only company building nuclear-powered ships for the Navy--GD and NNS already are building the Navy's Virginia-class nuclear-- powered attack submarines under a unique teaming arrangement.

Northrop Grumman--which only recently entered the shipbuilding business with the acquisition of Litton Ship Systems and its two shipbuilders, Litton Ingalls Shipbuilding and Avondale Industries--has challenged the GD-NNS merger, contending that it would create an "unhealthy monopoly" that "would leave the nation vulnerable with only one nuclear-capable submarine- and ship-builder." NG has tendered an offer to buy NNS, a move that--if approved-- would provide more balance and competition in the ship-- building industry, NG officials said.

General Dynamics said it regards the NG offer as "hostile," and maintains that an NNS merger with GD "is the only combination that can provide [the] synergies necessary to achieve significant merger-related savings ... [and that] offers the Navy depth of experience in the safe management of nuclear shipbuilding."