Northrop to sell TASC to comply with conflict-of-interest rules

By Gopal Ratnam and Jason Kelly
Monday, November 9, 2009

Northrop Grumman, the third-largest U.S. defense contractor, agreed to sell a government-consulting unit to a group of investors led by General Atlantic and Kohlberg Kravis Roberts affiliates for $1.65 billion.

The sale of TASC, to comply with new rules designed to prevent conflicts of interest, will generate about $1.1 billion in cash after taxes, Northrop said Sunday in a statement. The deal requires regulatory approval, and Northrop said it may be completed by the end of the year.

The transaction "reflects Northrop Grumman's desire to align quickly with the government's new organizational conflict-of-interest standards, while preserving TASC's unique organizational culture," Northrop chief executive Ronald D. Sugar said in the statement.

Northrop put TASC up for sale to address concerns among lawmakers that some defense contractors were advising government agencies on weapons systems and bidding for contracts to build them. The purchase gives the buyers an opportunity to benefit from U.S. defense spending, which will reach $680 billion in budget year 2010.

The TASC unit was acquired by Northrop as part of its $5 billion takeover of Litton Industries in 2001. The unit, formerly called the Analytic Sciences Corp., was founded in 1966 by engineers from the Massachusetts Institute of Technology and now has almost 5,000 employees.

The sale is one of Sugar's biggest divestitures. Sugar, who has sold a dozen businesses since 2003, has announced plans to step down in December. He will be replaced by Wes Bush, now president and chief operating officer of Los Angeles-based Northrop.

-- Bloomberg News

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