Northrop Grumman (NYSE:NOC) | Acquisitions & Divestitures

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Acquisitions



Northrop Grumman's most notable acquisitions during the last two decades includes the acquisition of Grumman Corporation in 1994, after which time the company was renamed Northrop Grumman Corporation. Grumman was a premier military aircraft systems integrator and builder of the Lunar Module that first delivered men to the surface of the moon. In 1996, Northrop Grumman acquired the defense and electronics businesses of Westinghouse Electric Corporation, which now forms the core of the Electronics Systems segment. Westinghouse was a world leader in the development and production of sophisticated radar and other electronic systems for defense, civil aviation, and other international and domestic applications. In 2001, Northrop Grumman acquired Litton Industries, a global electronics and information technology enterprise, and one of the leading full-service design, engineering, construction, and life cycle supporters of major surface ships for the U.S. Navy, Coast Guard and international navies. Also in 2001, Northrop Grumman acquired Newport News Shipbuilding, the sole designer, builder and refueler of nuclear-powered aircraft carriers (in the U.S.) and one of only two companies designing and building nuclear-powered submarines. In 2002, Northrop Grumman acquired TRW Inc., a leading developer of military and civil space systems and satellite payloads, as well as a leading global integrator of complex, mission-enabling systems and services. Other more recent acquisitions includes the acquisition of Integic Corporation (2005), an information technology provider specializing in enterprise health and business process management solutions, and Essex Corporation (2007), a signal processing product and services provider to U.S. intelligence and defense customers.

Significant acquisitions made by Northrop Grumman in the years 2009 to 2014 are discussed in the following.



Sonoma Photonics, Inc.


In April 2009, Northrop Grumman acquired Sonoma Photonics, Inc., as well as assets from Swift Engineering's Killer Bee Unmanned Air Systems product line for an aggregate amount of approximately $33 million in cash. The operating results of these businesses are reported in the Aerospace Systems segment from the date of acquisition. The assets, liabilities, and results of operations of these businesses were not material to the company's consolidated financial position or results of operations.




Divestitures



Visual Analytics, Incorporated


Northrop Grumman completed the spin-off to its shareholders of Huntington Ingalls Industries, Inc. (HII) effective March 31, 2011. HII was formed to operate the business that was previously the Northrop Grumman's Shipbuilding segment prior to the spin-off. The company made a pro rata distribution to its shareholders of one share of HII common stock for every six shares of Northrop Grumman common stock held on the record date of March 30, 2011, or 48.8 million shares of HII common stock. There was no gain or loss recognized by the company as a result of the spin-off transaction. In connection with the spin-off, HII issued $1,200 million in senior notes and entered into a credit facility with third-party lenders that includes a $650 million revolver and a $575 million term loan. HII used a portion of the proceeds of the debt and credit facility to fund a $1,429 million cash contribution to the company. In connection with the spin-off, Northrop Grumman has incurred total transaction costs of approximately $60 million.

Prior to the completion of the spin-off, Northrop Grumman and HII entered into a Separation and Distribution Agreement dated March 29, 2011 and several other agreements that govern the post-separation relationship. These agreements generally provide that each party is responsible for its respective assets, liabilities and obligations following the spin-off, including employee benefits, intellectual property, information technology, insurance and tax-related assets and liabilities. The agreements also describe Northrop Grumman's commitments to provide HII with certain transition services for up to one year and the costs incurred for such services that are reimbursed by HII.



National Security Technologies (NSTec) Joint Venture


Effective January 1, 2011, Northrop Grumman reduced its participation in the National Security Technologies joint venture (NSTec). As a result of the reduced participation in the joint venture, the company no longer consolidates NSTec's results in the consolidated financial statements. NSTec's sales that were included in the company's consolidated sales and service revenues for the year ended December 31, 2010 and 2009 were $579 million, and $568 million, respectively.



Advisory Services Division (ASD)


In December 2009, Northrop Grumman sold the Advisory Services Division (ASD) for $1.65 billion in cash to an investor group led by General Atlantic, LLC, and affiliates of Kohlberg Kravis Roberts & Co. L.P., and recognized a gain of $15 million, net of taxes. ASD was a business unit comprised of the assets and liabilities of TASC, Inc., its wholly-owned subsidiary TASC Services Corporation, and certain contracts carved out from other Northrop Grumman businesses also in Information Systems that provide systems engineering technical assistance (SETA) and other analysis and advisory services. Sales for ASD in the year ended December 31, 2009 were approximately $1.5 billion. The assets, liabilities and operating results of this business unit are reported as discontinued operations in the consolidated statements of operations for all periods presented.

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