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Money News

Northrop’s Acquisition Will Boost Its Space Capabilities

September 18, 2017

If approved by regulators, the deal would instantly boost Northrop’s missile-making and deterrence capabilities.

2 min read

On Monday, defense technology titan Northrop Grumman announced plans to acquire aerospace company Orbital ATK for $7.8 billion in cash, plus $1.4 billion in debt.

If approved by regulators, the multi-billion dollar deal would instantly boost Northrop’s missile-making and deterrence capabilities as competition heats up in the defense industry, and as North Korea continues flexing its might by testing intercontinental nuclear missiles capable of reaching the U.S.

Space: the next frontier

Orbital manufactures aerospace equipment, including missiles and propulsion systems, armament systems and ammunition, as well as satellites and other space components. Space is expected to be the next big frontier in defense technology, according to experts.

Northrop announced it had been awarded $328M contract from the Air Force to construct a missile deterrent shield

More specifically, by purchasing Orbital, Northrop will add to its missile-defense capabilities, the Wall Street Journal reports.

Northrop is one of the largest defense companies in the world, and one of the biggest contractors for the U.S. Department of Defense. In August, Northrop announced it had been awarded $328 million contract from the Air Force to construct a missile deterrent shield.

Competition heats up

Northrop is also reportedly vying with defense giant Boeing for the development of a ground-based missile deterrence system, and the potential acquisition comes at a time when merger and acquisition activity in the defense industry has reached record levels.

“The acquisition of Orbital ATK is an exciting strategic step as we continue to invest for profitable growth,” Wes Bush, Northrop’s chief executive officer said in a press release.  “Through our combination, customers will benefit from expanded capabilities, accelerated innovation and greater competition in critical global security domains.”

News of the acquisition talks sent Orbital stock up 20% on Monday.

More acquisitions

Earlier in September, competing defense company United Technologies said it would acquire aviation company Rockwell Collins for $23 billion, the largest acquisition that United Technologies has ever made.  

Pending regulatory approval, the tie-up of United and Rockwell would create one of the largest aerospace manufacturers in the world, according to industry analysts, and it would rank as the largest aerospace acquisition on record, according to the Wall Street Journal.

Top Takeaways

The aerospace and defense industry is undergoing a wave of mergers and acquisitions, of which Northrop Grumman’s plans to acquire missile and satellite manufacturer Orbital ATK is just the latest.

The tie-up of Northrop with Orbital will boost Northrop’s missile defense technology following a contract with U.S. Air Force to continue building anti-missile technology. The news comes as North Korea continues testing intercontinental ballistic nuclear warheads capable of hitting the U.S. mainland.

 

By Jeremy Quittner
Jeremy Quittner is the senior writer for Stash.

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