Northrop Grumman to buy Logicon in stock transaction worth 1.24 times revenue

Weekly Corporate Growth Report, May 12, 1997

The Deal: Northrop Grumman has agreed to acquire Logicon Inc. in a stock deal valued at $750 million, or $52/ share. The agreement calls for Logicon shareholders to receive an as-yet-undetermined fraction of a Northrop Grumman share. The size would be determined by dividing $52 by the average closing price of Northrop Grumman's closing stock during a 30-day trading period before the proxy statement is mailed. The range would be no less than 0.5661 and no more than 0.6919.

Discussion: Logicon is a well-respected name in a rather esoteric field. The company makes software and other products that helps the military and private industry manage information and train personnel, among other things. It has a contract with the US Army that takes senior commanders and staff members through a round-the-clock battle simulation called "Warfighter." Another product of Logicon is used to link the computer systems of the federal, state and local law enforcement agencies so that they can gather better information on criminal activity.

The transaction will create an operation to be called Logicon Information Technology Division. It is expected to have revenue near $1 billion. The new company will expand Northrop's reach in its core information-services lines, showing the company's determination to bounce back after losing a bidding war in early 1997 for the defense holdings of Hughes Electronics Corp. The acquisition will firmly establish Northrop Grumman as a key player in defense information technology. It expects to see double digit growth into the next century.