Orbital ATK, the defense contractor who manages and operates the Lake City Army Ammunition Plant, will soon be bought by defense giant Northrop Grumman, according to an article released on Reuters. The purchase price is expected to be close to $8 billion USD. From Reuters:
NEW YORK (Reuters) – U.S. defense contractor Northrop Grumman Corp (NOC.N) is poised to announce a purchase of missile and rocket maker Orbital ATK Inc (OA.N) as soon as Monday, a person familiar with the transaction said on Sunday.
The deal would come as the firing of missiles by North Korea in recent months has focused attention on missile defense systems.
With Orbital’s stock market value of $6.3 billion and $1.4 billion of long-term debt, the deal’s final value will likely exceed $7.7 billion.
Northrop Grumman declined to comment. Orbital did not immediately respond to a request for comment.
Orbital’s rocket motors, missiles and electro-optical countermeasure product lines would enlarge Northrop’s offerings to its largest customer, the U.S. Department of Defense, analyst Byron Callan of Capital Alpha Partners LLC said in a research note on Sunday.
The deal is noteworthy not only because it boosts Northrop’s exposure to missile defense, but also because the company has not bought a large rival in many years. It would also represent a departure from a focus of returning earnings to shareholders.
Orbital ATK has contracts with NASA as well as the U.S. Army and the deal would give Northrop more than $4.4 billion in annual revenue according to Orbital’s 2016 financials.
Besides managing Lake City, Orbital ATK is also the 31st largest defense contractor in the world, according to a list published by Defense News. ATK formerly owned Bushnell, Blackhawk!, Federal Premium, Hoppe’s, CCI, Tasco, and many other shooting and outdoor brands, before those subdivisions were spun off as Vista Outdoor in 2014, following the ATK-Orbital merger. On the defense side, ATK is responsible for the Bushmaster series of autocannons, including the M242 and M230, the XM1156 Precision Guidance Kit for 155mm artillery shells, the AGM-88E AARGM anti-radar missile, and the now-aborted XM25 Counter Defilade Target Engagement system.
Northrop-Grumman is the fifth largest defense contractor in the world (behind Lockheed, Boeing, BAE Systems, and Raytheon), and was formed in 1994 from Northrop’s purchase of the Grumman Aerospace Corporation. Northrop has been responsible for many famous defense projects, including the B-2 Spirit stealth bomber, WWII-era P-61 Black Widow nightfighter, and, most recently, the B-21 Raider Long Range Strike Bomber, and the James Webb Space Telescope.