he Northrop
Grumman Corporation raised its hostile offer for TRW
Inc. by $758 million, to $6.7 billion in stock, last night in a
last-ditch effort to pressure TRW to engage in talks.
TRW, the satellite and missile contractor based in Cleveland, has
twice spurned offers from Northrop, the big military contractor
based in Los Angeles. Northrop first approached TRW in February with
a friendly bid of $5.9 billion, but that offer turned hostile in
March after TRW's board rejected the deal.
In two weeks, TRW's shareholders are scheduled to vote on the
sweetened bid.
TRW, meanwhile, is continuing with its plan to spin off its
automotive unit to increase TRW's value without having to be bought
by Northrop. Northrop had similarly planned to spin off the
automotive unit if it took control of the company.
The latest offer from Northrop — $53 a share compared with $47 —
may compel TRW's board to come to the table. The offer represents a
13 percent premium over its original bid, but only a 2 percent
premium over TRW's closing stock price on Friday of $51.97.
"We strongly encourage TRW shareholders to send a strong message
to their board of directors in favor of inviting us to conduct due
diligence," said Kent Kresa, Northrop Grumman's chairman and chief
executive.
"If the TRW board continues to deny us access, this offer will
not proceed," he added.
Mr. Kresa defended Northrop's decision to raise its offer after
refusing to do so before by saying that the new bid reflected
"improving economic conditions which drive TRW's end markets and
continuing positive developments in the defense industry."
Northrop has been aggressively lobbying institutional investors
in recent weeks to overturn TRW's defense measures. In particular,
Northrop has met recently with Institutional Shareholder Services,
the influential advisory firm that most recently played a role in Hewlett-Packard's
bid for Compaq
Computer by telling clients to vote in favor of a merger.
Institutional Shareholder Services is expected to make its
recommendation on Wednesday.
TRW officials could not immediately be reached for comment.
Analysts and industry executives have said that Northrop, like
its rivals Lockheed Martin and Boeing,
is preparing for a time when more taxpayers' dollars are expected to
be sent to military contractors in the wake of the Sept. 11
attacks.
The military industry contracted in the 1990's, laying off
thousands of workers and closing factories, particularly in Southern
California, which was once the center of the industry but is no
longer, as many companies have moved away.