TRW Inc. announced today
that its board of directors has unanimously determined to reject Northrop
Grumman Corporation’s proposal set forth in its letter dated
February 21, 2002 to acquire all of the outstanding shares of TRW for $47 per
share in Northrop Grumman stock.
After careful consideration, including
consultation with independent financial and legal advisors, the TRW board of
directors concluded that Northrop Grumman’s proposal was financially
inadequate.
The board noted its belief that the Northrop Grumman proposal
grossly undervalues TRW’s advanced portfolio of technology and market
leadership positions in space, defense, information systems and automotive
parts, and is not consistent with the board’s objective of enhancing
shareholder value.
“This is all about shareholder value,” said Philip A. Odeen, TRW’s
chairman, “and the Northrop Grumman proposal does not begin to recognize the
value of TRW’s franchise.”
Following is a letter sent today from TRW chairman Philip A. Odeen and
lead director Kenneth A. Freeman to Kent Kresa, chairman and chief executive
officer of Northrop Grumman.
March 3, 2002
Mr. Kent Kresa
Chairman of the Board and Chief Executive Officer
Northrop Grumman Corporation
1840 Century Park EastLos Angeles, CA 90067
Dear Mr. Kresa:
The board of directors of TRW has met to consider Northrop Grumman's
February 21 proposal to acquire TRW for $47 per share in stock.
After careful consideration, including a thorough review of the proposal
with our independent financial and legal advisors, the board has
determined not to pursue discussions with regard to Northrop Grumman's
proposal. Simply put, the board has unanimously concluded that Northrop
Grumman's proposal is financially inadequate. We believe Northrop
Grumman's proposal grossly undervalues TRW's businesses, including its
premier franchise in the defense industry, does not adequately reflect
the true value of our unique market position and business opportunities,
and is not consistent with our objective of enhancing shareholder value.
In making this determination, and based on your letter, we have assumed
that the $47 per share would be in fixed value and that the timing or
closing of such transaction would not be conditioned in any way upon the
separation of our automotive business. Accordingly, our board has
determined that there is no reason to explore Northrop Grumman's proposal
further.
The board views Northrop Grumman's proposal as an opportunistic attempt
to acquire one of the industry's leading space and electronics and
systems businesses at a time when TRW's stock price was temporarily
depressed after the sudden departure of David Cote, our former chairman,
president and chief executive officer. In addition, as of March 1, 2002,
TRW's stock price closed at $50.05 per share, over $3 per share higher
than Northrop Grumman's proposal.
TRW is positioned for future technology-driven growth. Our space and
defense businesses ligain the "sweet spot" of growth in national defense
and homeland security. Our aeronautical business is a global leader in
control systems and product support and is well positioned for growth as
the commercial aerospace sector continues to rebound. Our global
automotive business is a market and technology leader in our product
segments and is generating strong cash flow, even at the bottom of the
automotive cycle. We have been driving cost reductions and productivity
improvements, while creating a customer-focused, performance-driven
culture. Over the past three years, we have reduced net debt by
$3.9 billion. In 2001, we exceeded earnings expectations for each
quarter and are on track to meet 2002 expectations.
We are confident in TRW's ability to continue to take the steps necessary
to fully realize the value of our franchise. Toward this end, the
board's executive search committee, comprised of outside directors, has
selected a prominent executive search firm and is actively engaged in a
search for a new chief executive officer. As you know, TRW has an
experienced senior management team and an outstanding employee base. We
are 94,000 strong worldwide and our employees are highly committed to the
company and their customers in the aerospace, systems and automotive
businesses. With our unparalleled technologies and market leading
positions, we are confident that great things can continue to be expected
from TRW.
Sincerely,
//s// Philip A. Odeen //s// Kenneth W. Freeman
Philip A. Odeen Kenneth W. Freeman
Chairman Lead Director
Goldman, Sachs & Co. and Credit Suisse First Boston Corporation are
serving as financial advisors to TRW, and Skadden, Arps, Slate, Meagher & Flom
LLP is serving as legal counsel.
Statements that are not statements of historical fact may be
forward-looking statements.
Important factors that could cause TRW’s actual
results to differ materially from the forward-looking statements contained in
this release can be found in TRW’s most recent quarterly report on Form 10-Q
for the quarter ended September 30, 2001.
This release does not relate to Northrop Grumman’s exchange offer
announced March 3, 2002.
Shareholders of TRW are advised to read TRW’s
Solicitation / Recommendation Statement on Schedule 14D-9 when it becomes
available because it will contain important information.
Shareholders of TRW
and other interested parties may obtain, free of charge, copies of the
Schedule 14D-9 and other documents filed by TRW at the SEC’s internet website
at www.sec.gov.
Each of these documents may also be obtained, free of
charge, by calling investor relations at TRW at 216-291-7506.
TRW provides advanced-technology products and services for the aerospace,
systems, and automotive markets.