Northrop Grumman Corp. said yesterday that it will sell a majority stake in TRW Inc.'s auto-parts unit for $4.4 billion in cash and debt after completing its takeover of TRW.
The deal calls for investment-banking firm Blackstone Group to buy 58 percent of the unit from Northrop. Northrop expects to complete its $7.8 billion acquisition of Cleveland-based TRW by year-end, after approval by shareholders and the Justice Department.
Under the agreement, Blackstone would pay Los Angeles-based Northrop $3.8 billion in cash and borrow $600 million from Northrop. Northrop would initially retain 42 percent of the auto-parts business, but officials said they plan to reduce Northrop's stake in the business to 20 percent next year.
Selling the auto-parts unit was an important part of Northrop's acquisition plan; from the beginning Northrop has said it would spin it off or sell it. "The sale removes a partial overhang from Northrop Grumman shares," said Byron Callan, an analyst with Merrill Lynch.
The $10 billion-a-year unit produces much of TRW's revenue and profit but was far beyond Northrop's defense focus, company officials said. The sale also would provide Northrop cash to pay debt and make integrating operations easier.
"In the context of the overall transaction . . . we have no business interest in running an auto company," said Albert Myers, Northrop's executive in charge of mergers and acquisitions. "We are clearly a defense company, and [the auto business] would have clearly been a management distraction."
TRW's satellite and defense businesses were what Northrop wanted. The transaction "will allow our management team to quickly focus its full attention on integrating TRW's superior space and defense assets into our portfolio," Kent Kresa, Northrop's chairman, said in a prepared statement.