Aerospace and defense manufacturer Northrop Grumman has struck a $9.2 billion deal to acquire Orbital ATK — a smaller-fry aerospace and defense company holding important NASA contracts.
Terms of the definitive agreement call for a $7.8 billion cash payment and the assumption of $1.4 billion in debt. The all-cash payout to shareholders amounts to $134.50 per share, with the Orbital deal expected to lose by mid-2018.
Orbital stock (NYSE: OA) rocketed as news of the deal circulated early Sept. 18. Shares soared $22.5, or more than 20 percent by midday to $132.50.
Northrop investors also appeared comfortable with the acquisition. Northrop shares rose $5.42, or more than 2 percent, to $272.45 by midday.
“The acquisition of Orbital ATK is an exciting strategic step as we continue to invest for profitable growth,” Northrop chairman-CEO Wes Bush said. “Through our combination, customers will benefit from expanded capabilities, accelerated innovation and greater competition in critical global security domains. 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.”
Said Orbital chief David Thompson: “The unique alignment in culture and mission offered by this transaction will allow us to maintain strong operational performance on existing programs, while we pursue new opportunities that require the enhanced technical and financial resources of a larger organization. Our employees will also benefit from greater development and career opportunities as members of a larger, more diverse aerospace and defense enterprise.”
Northrop said it will operate Orbital as a distinct business while transitioning its corporate operations into the parent company.
Northrop Grumman is based in Falls Church, Va., and is best known as a defense contractor — the world’s fifth largest. It was formed in 1994 when Northrop and Grumman merged.
Based in Dulles, Va., Orbital ATK was formed in 2015 through the merger of Orbital Sciences and portions of Alliant Techsystems. Its work for NASA includes cargo-shuttle missions to the International Space Station.