Shares of Newport News Shipbuilding fell 16 percent yesterday following the Navy's decision to oppose an unsolicited $1.8 billion bid for the company from rival Litton Industries Inc.
Newport News shares ended the day at $27.50, down $5.25. Litton's shares rose, closing $2.43 3/4 higher, at $65.18 3/4.
Earlier in the day, Defense Secretary William S. Cohen told reporters he agreed with the Navy's opposition to Litton's bid on the grounds that it would stifle competition among shipbuilders.
Woodland Hills, Calif.-based Litton made twin, unsolicited bids for Newport News and another shipyard, Avondale Industries of New Orleans, earlier this month after Cohen blocked a higher bid for Newport News from rival General Dynamics Corp. of Falls Church.
Cohen said then the marriage of Newport News, the Navy's primary supplier of nuclear aircraft carriers, and General Dynamics, which builds nuclear submarines, would concentrate too much of the Navy's nuclear shipbuilding program under one roof.
The drop in Newport News shares brings the price nearthe $28.43 3/4 they closed at before General Dynamics made its $38-a-share offer on Feb. 18. The shares steadily lost value after Cohen blocked the bid in April, reaching a low of $25.87 1/2 right before Litton's May 6 offer, then rising to a 52-week high of $38 the next day.
"I think the stock stays down where it was," said Paul Nibset, an analyst with JSA Research Inc. in Newport, R.I. "It had the premium in it when it looked like it was going to be acquired."
Litton, which builds surface attack ships and amphibious landing craft, would have become the largest Navy shipbuilder if it had been allowed to acquire Newport News and Avondale.
The Navy supports Litton's purchase of Avondale for $500 million in cash, sources said. Avondale officials have said they are studying Litton's offer, which they regard favorably.
Newport News spokesman Mike Hatfield said of Cohen's remarks, "It sounds like he is leaving little to the imagination."
Dismissing the sell-off in the company's stock, Hatfield said Newport News was doing well and "looking forward to performing as an independent shipbuilder if this is the way it ultimately turns out."
Industry analysts said it was always Newport News's preference to remain independent, after having been spun off from conglomerate Tenneco Inc. in 1996.
Litton spokesman Randy Belote said the company continues to believe bringing the three companies under one corporate ownership is the best thing for employees, stockholders and the Navy.
But he said, "We basically were aware going into this there was a risk of not getting approval. The negotiations with Avondale continue and we're pursuing the discussions with an intent to reach a final agreement."
CAPTION: Backing Away (This chart was not available)