Northrop Grumman Corporation announced today that it has signed a definitive agreement to sell the Automotive business of TRW Inc. to The Blackstone Group in a deal that values TRW Automotive at $4.725 billion U.S.
The Blackstone Group, a leading private investment firm, recently raised the world’s largest private equity fund at $6.45 billion, and the purchase of TRW Automotive will be the first investment made by this fund.
Under the terms of the agreement, which is conditioned on the closing of the Northrop Grumman/TRW merger, the seller will receive $4.725 billion, comprised of $3.757 billion in cash, $600 million in debt securities and an initial $368 million equity interest (approximately 42 percent of total equity of $868 million) in TRW Automotive.
The parties intend to reduce their initial equity positions in TRW Automotive before closing. At the close of the transaction, anticipated to be in the first quarter of 2003, the seller’s equity interest is expected to be approximately 20 percent, which would increase total cash consideration to between $3.9 billion and $4.0 billion.
Cash proceeds from the sale of TRW Automotive, along with the proceeds already received from the completed sale of TRW Aeronautical Systems, will be used to pay down debt. All financing necessary to complete the transaction has been provided by JP Morgan, Credit Suisse First Boston and Lehman Brothers.
“We’re very pleased to announce the sale of TRW Automotive. As we’ve maintained, Northrop Grumman’s strategic interest is in TRW’s space, electronics and systems businesses,” said Kent Kresa, Northrop Grumman’s chairman and chief executive officer.
“We believe that our agreement with Blackstone is an attractive transaction for our shareholders and will allow our management team to quickly focus its full attention on integrating TRW’s superior space and defense assets into our portfolio.” Ronald D. Sugar, Northrop Grumman’s president and chief operating officer, added, “We look forward to benefiting from TRW’s strong defense operations once the TRW merger is complete. In addition, we are pleased to be working on this transaction with Blackstone, which has a long history of making successful equity investments, including those in the automotive parts sector. Moreover, the separation provides a great opportunity for the employees of TRW Automotive to flourish as part of a new, focused stand-alone company.”
Stephen A. Schwarzman, president and chief executive officer of The Blackstone Group, said, “We are delighted to reach agreement with Northrop Grumman on this transaction. TRW Automotive is a leading global automotive supplier which enjoys a unique competitive position in the active and passive safety arena. We look forward to supporting the company’s growth strategy as an independent company.”
The Northrop Grumman and TRW shareholder votes on the merger are scheduled for Dec. 11, 2002. The sale of TRW Automotive is also subject to customary closing conditions including review under the Hart-Scott-Rodino Act and obtaining certain other governmental and regulatory approvals in the U.S. and Europe.
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