Northrop Grumman is buying Orbital ATK for $7.8 billion

Defense giant is acquiring aerospace and defense firm Orbital ATK Inc. for about $7.8 billion in cash, a deal that would boost Northrop’s presence in the space, launch and missile industries.

Orbital shareholders are to receive $134.50 per share in cash, a 22.2% premium over Friday’s closing price. Northrop is to assume $1.4 billion in net debt.

Orbital, based in Dulles, Va., makes rocket motors that power missiles, and it designs and produces target launch vehicles that are used to test missile defense systems.

The company also makes the interceptor boosters for the U.S. Ground-based Midcourse Defense system, the nation’s primary protection against a missile strike.

Northrop — along with competitor Boeing Co. — was recently chosen by the Air Force to continue work on designs for a new intercontinental ballistic missile system known as the Ground Based Strategic Deterrent program.

In a call with analysts Monday morning, Northrop Chief Executive Wes Bush described Orbital’s capabilities as very “complementary.” Among other strengths, Bush said, the deal could create new opportunities and offerings for customers in missiles and strategic deterrents.

The deal, which is still subject to regulatory approval as well as approval by Orbital shareholders, is expected to close in the first half of 2018.

After the deal closes, Orbital is to be established as a new business sector in Northrop and will operate as its own segment, at least initially. Bush said the company had not set any timeline for “any different look for the organization.”

Orbital CEO David Thompson said in the call that operating management teams and the company’s workforce will be kept in place, though final decisions on sector leadership have not yet been made.

“Like our other senior corporate executives, I am very supportive of this transaction and will be available to support Wes and his team as we move forward,” he said.

On the space side, Orbital has a NASA contract to ferry supplies via its Antares rocket to the International Space Station.

It has also developed the Pegasus, a smaller rocket that can be attached to the belly of the company’s Stargazer L-1011 airplane and launched while the plane is in flight.

Orbital plans to add more capabilities to its lineup with its first intermediate and heavy-lift rockets, known for now as .

The NGL rockets are still being developed, but Orbital hopes to eventually get them certified by the U.S. Air Force to compete for lucrative national security launch contracts.

Northrop, based in Falls Church, Va., is known for building aircraft such as the B-2 bomber, as well as unmanned aerial vehicles such as the Global Hawk surveillance craft.

In 2015, the defense company won a contract to build the next generation of stealth bombers known as the B-21.

Northrop is also constructing the James Webb Space Telescope, an $8.8-billion spacecraft with a 21-foot-diameter mirror that is set to capture the oldest light in the universe.

Thompson said discussions between the two companies began earlier this year, but that Orbital had not been shopping itself around.

UPDATES:

6:40 a.m.: This article was updated with details from executives’ conference call with analysts.

This article was originally published at 4:50 a.m.

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