Northrop Grumman Leans Toward Spinning-Off Naval Unit -CEO

14th Jul 2010 16:04

By Doug Cameron Of DOW JONES NEWSWIRES The head of Northrop Grumman Corp. (NOC) said Wednesday that spinning-off its naval shipbuilding unit was the "primary" focus of its strategic review. The third-largest Pentagon contractor by sales said Tuesday that it would close one of its seven U.S. naval yards and may sell or spin-off the entire business. The move comes in the wake of the U.S. Navy's new 30-year fleet plan, broader Pentagon spending cuts and a shift in military priorities toward smaller, more nimble weapons platforms. "Going forward, we see little synergy between shipbuilding and our other businesses," said CEO Wes Bush on a call with analysts. He said Northrop was not looking to separate nuclear-capable naval assets--which make aircraft carriers and submarines--from those making destroyers, assault ships and coast guard cutters. Bush, who took over as CEO in January, said a spin-off to shareholders was the main focus of the review. He has hired Credit Suisse to lead the review of the naval business, with Perella Weinberg Partners also advising. Northrop has 40,000 staff at seven main shipbuilding yards, and is a key employer in Virginia, Mississippi and Louisiana, with sales of $6.2 billion last year. The shipbuilding unit had a backlog of $19.1 billion at March 31 and carried goodwill of $1.14 billion. Northrop executives declined to comment on potential pricing, saying only that it carried "substantial" book value. BAE Systems PLC (BA.LN) is viewed by analysts as one of few potential buyers if Northrop opts to sell the naval business. The U.K. company declined comment, though has signaled its interest in the sector and recently bought a U.S. ship-repair business. Northrop shares were recently up 3.2% at $57.08. -By Doug Cameron, Dow Jones Newswires; 312-750-4135; [email protected] (Steve McGrath contributed to this article.) (END) Dow Jones Newswires July 14, 2010 11:04 ET (15:04 GMT)