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September 19, 2017

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Northrop to buy rocket maker Orbital

US defense contractor Northrop Grumman Corp said yesterday it would buy missile and rocket maker Orbital ATK Inc for about US$7.8 billion in cash, giving it access to lucrative contracts with NASA and the US Army.

The deal, which comes as North Korea tests threatening missiles, will also help Northrop increase its arsenal of missile defense systems and is a rare departure for the company, which has not made a large acquisition in several years. It last bought TRW Inc in 2002 for about US$7.8 billion.

The acquisition, which would establish Orbital as a new, fourth business sector under Northrop, also comes ahead of a likely jump in demand from the planned upgrades of US ballistic systems.

The Air Force last summer called for proposals to replace its aging nuclear cruise missiles and intercontinental ballistic missile system as the military moves ahead with a costly modernization of older atomic weapons systems.

Northrop’s offer price of US$134.50 per Orbital share represents a premium of 22 percent over the stock’s Friday close.

Northrop will assume US$1.4 billion in Orbital’s net debt and the deal is expected to close in the first half of 2018.

Orbital is one of two companies hired by NASA to fly cargo to the International Space Station.


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