The Strategist

Northrop Grumman to buy missile manufacturer Orbital

09/19/2017 - 08:33

American military-industrial company Northrop Grumman Corporation is buying a supplier of technologies for the aerospace and defense industry Orbital ATK. The price is expected to amount to $ 7.8 billion in cash.

U.S. Air Force photo
U.S. Air Force photo
After the news were published, Orbital ATK's stock prices jumped by more than 20% to $ 131.89. Buyer Northrop Grumman will pay $ 134.5 per share, which this means a 22% premium to the Orbital ATK's closing price on Friday.

One of the leading US military industrial companies, Northrop Grumman, expects that the deal will bring profit within the first year from the date of purchase. According to the company's plans, cost savings by 2020 will amount to $ 150 million annually.

Orbital produces rocket engines and other parts for various missile systems and satellites for military and commercial purposes. The company was founded in 2015 as a result of the merger of the two companies in the rocket and space industry - Alliant Techsystems and Orbital Sciences. Orbital ATK employs about 13 thousand employees. This year, the company planned to sell at $ 4.6 billion. According to some analysts, the company is a potential acquisition target for large companies like Boeing Co., Lockheed Martin Corp. or Northrop.

Orbital has numerous contracts with the National Space Agency (NASA) and the US Armed Forces.

Two banks from Wall Street are going to earn solid amounts on the deal to buy Orbital. According to the consulting firm Freeman & Co. an independent investment bank Perella Weinberg Partners and Citigroup will share $ 85 million. This will be payment for consulting for the transaction.

It is expected that Northrop Grumman Corporation will close the acquisition of Orbital ATK in the first half of next year. The transaction is beneficial to both parties. The total sales volume of both companies this year should be $ 30 billion, according to the latest estimates.