96.5 F
San Fernando
Thursday, Mar 28, 2024

Northrop’s Orbital Purchase Sends Stock Skyward

Northrop Grumman Corp., a giant aerospace contractor with a large presence in the Valley region, has acquired another defense company with a local presence, driving Northrop’s stock higher. Northrop, based in Falls Church, Va., announced Sept. 18 it had reached an agreement to buy Orbital ATK Inc. for $9.2 billion, including the assumption of $1.4 billion in debt. Both companies’ boards have approved the deal, which is expected to close in early 2018. Although both companies are headquartered in Virginia, they have extensive operations in the Valley. Orbital, in Dulles, Va., has a facility in Northridge for developing advanced anti-radiation guided missiles used on the U.S. Navy’s Hornet, Super Hornet and Growler aircraft and the Italian Air Force’s Tornado aircraft. The Valley location also has production lines to produce the AAR-47 Missile Warning System, designed to protect helicopters and fixed-wing aircraft from surface-to-air threats; and Common Munitions BIT Reprogramming Equipment, used for flight software. Northrop has its Navigation Systems division headquartered in Woodland Hills to develop and manufacture navigation and positioning systems for aircraft, satellites, missiles and ships. The company also has a facility in Palmdale for manufacturing the Global Hawk unmanned aircraft and maintenance and upgrades on the B-2 Spirit stealth bomber. A Sept. 21 report from Zacks Investment Research found the combined company will be well-positioned for government contracts. “Orbital ATK’s expertise in satellites, spacecraft components and commercial space launch systems is anticipated to expand Northrop’s product portfolio. As such, the combined company will be able to hold a larger portion of the U.S. defense order through a diverse product portfolio,” the report stated. Also, the enlarged Northrop “is well poised to gain from the Senate’s approval of higher defense spending in fiscal 2018,” according to the report. The Senate approved a $700 billion defense spending bill for 2018 on Sept. 22. Northrop’s stock has enjoyed a tailwind for months on anticipation of a larger U.S. defense budget. The stock has gained nearly 20 percent since Jan. 1. The day the Orbital acquisition was announced it jumped 3.3 percent to close at $275.97. It closed Sept. 27 at $286.84. Upon completion of the acquisition, Northrop plans to establish Orbital ATK as a fourth business sector to complement its three current ones – aerospace systems, technology services and mission systems. Northrop anticipates efficiencies from the acquisition will result in annual cost savings of $150 million by 2020. “The acquisition of Orbital ATK is an exciting strategic step as we continue to invest for profitable growth,” Wes Bush, chief executive at Northrop, said in a statement. “Through our combination, customers will benefit from expanded capabilities, accelerated innovation and greater competition. … Our complementary portfolios and technology-focused cultures will yield significant value creation through revenue synergies associated with new opportunities, cost savings, operational synergies, and enhanced growth.”

Joel Russel
Joel Russel
Joel Russell joined the Los Angeles Business Journal in 2006 as a reporter. He transferred to sister publication San Fernando Valley Business Journal in 2012 as managing editor. Since he assumed the position of editor in 2015, the Business Journal has been recognized four times as the best small-circulation tabloid business publication in the country by the Alliance of Area Business Publishers. Previously, he worked as senior editor at Hispanic Business magazine and editor of Business Mexico.

Featured Articles

Related Articles