BOEING TO BUY ROCKETDYNE : OTHER SPACE, DEFENSE UNITS INCLUDED IN $3.2 BILLION DEAL.Byline: Dawn Yoshitake Daily News Staff Writer The Boeing Co. announced plans Thursday to acquire the aerospace and defense unit of Rockwell International Rockwell International was the ultimate incarnation of a series of companies under the sphere of influence of Willard Rockwell, who had made his fortune after the invention and successful launch of a new bearing system for truck axles in 1919. Corp. for $3.2 billion - a deal that includes the Rocketdyne Division and a number of other Southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, operations. Under the deal, Boeing hopes to bolster its standing in the commercial space and defense field. ``It's an excellent strategic fit,'' said Phil Condit, Boeing chief executive and president. ``Rockwell brings its space and guidance rockets and Boeing has its airplanes and helicopters. This brings them together for a stronger unit than what they would be separately.'' Rockwell, meanwhile, has been looking to further divest To deprive or take away. Divest is usually used in reference to the relinquishment of authority, power, property, or title. If, for example, an individual is disinherited, he or she is divested of the right to inherit money. its aerospace and defense operations since the 1980s, when the defense budget began its downward spiral and Cold War tensions began to thaw. Rockwell has seen its aerospace and defense sales fall from more than 50 percent of its revenue pie in the 1980s to around 25 percent today. ``This is a historic step in the continuing transformation of Rockwell, which has been shifting its strategic focus to higher growth commercial and international businesses,'' Donald Beall, Rockwell chairman and chief executive, said in a statement. He said Rockwell wants to concentrate primarily on its electronics businesses, such as semiconductor systems, avionics and communications and automotive component businesses. Under the deal, Boeing will assume $2.2 billion of Rockwell's debt, pay off $100 million in Rockwell's liabilities and issue about $860 million in stock to Rockwell shareholders. The proposed deal calls for combining Rockwell's aerospace and defense unit with Boeing's Defense & Space Group to create a wholly-owned subsidiary expected to generate upward of more than; above. See also: Upward $9 billion. The new entity will be based at Rockwell's existing Seal Beach Seal Beach, city (1990 pop. 25,098), Orange co., S Calif., on the Pacific coast; inc. 1915. It is a beach city with an active art colony. Transportation equipment and concrete are among the city's manufactures. U.S. naval stations are nearby. headquarters and will be called Boeing North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. Inc. Rockwell will maintain its world headquarters in Southern California at a yet-to-be-named location. The deal is expected to close at the end of the year, pending regulatory approval and ratification The confirmation or adoption of an act that has already been performed. A principal can, for example, ratify something that has been done on his or her behalf by another individual who assumed the authority to act in the capacity of an agent. by Rockwell shareholders in November. Eight Rockwell divisions and a 50 percent interest in a joint venture with Lockheed Martin For the former company, see . Lockheed Martin (NYSE: LMT) is a leading multinational aerospace manufacturer and advanced technology company formed in 1995 by the merger of Lockheed Corporation with Martin Marietta. Corp. will be sold to Boeing. Among the divisions to be spun off are Rocketdyne, based in Canoga Park, and the Space Systems and North American Aircraft divisions in Palmdale. Rockwell is the world's largest maker of semiconductors for fax machines and modems. ``When you plunge into the world of personal computers and the Internet, you're talking about a more volatile business, (but) it's a business that has treated Rockwell very well,'' Beall said. Beall said he expects annual earnings of $3.06 a share after the transaction and predicted 8 percent growth in sales and 15 percent in revenue. Operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before at Rockwell's space-systems segment rose to $289 million in the first nine months of the fiscal year from $255 million in the year-ago period. Earnings from the defense electronics businesses fell to $91 million from $112 million. Boeing officials said few layoffs and anti-trust issues are expected in the wake of the purchase because there is little overlap between the two companies. One area of redundancy, however, involves a project to develop an airborne laser to shoot down missiles. Rockwell has teamed up with Hughes Electronics to win an Air Force contract to develop the laser. Boeing has a competing team of defense contractors Noun 1. defense contractor - a contractor concerned with the development and manufacture of systems of defense armed forces, armed services, military, military machine, war machine - the military forces of a nation; "their military is the largest in the region"; to land the deal. Boeing officials said the competing bids will continue to move forward. But should Rockwell lose the contest, it's unknown what will happen to the resources and employees working on that project once the acquisition is completed, said Sherry Nebel, a Boeing spokeswoman. ``We're nowhere near addressing layoffs. It's up to the transition team,'' she said. ``The laser is pretty much Rthe only significant area of overlap.'' Analysts, meantime, applauded the deal. ``The space division is a natural given where Boeing is going with its space division. It's an excellent fit,'' said Jon Kutler, president of Quarterdeck (Quarterdeck Corporation, Marina del Rey, CA) A pioneering software company, founded in 1983, that offered a variety of utilities, diagnostics, connectivity and Internet products for the PC and Macintosh. Investment Partners, a Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. firm that specializes in aerospace and defense mergers and acquisitions. He noted, however, that the benefits of Boeing receiving the Rocketdyne Division could be questionable. Rocketdyne and the Space Systems divisions reported combined sales of $1.9 billion in fiscal 1995. That's a 34.5 percent drop from 1990. Kutler speculated that Rocketdyne employees don't need to worry about job security for the near future. He suggested that Boeing is swamped with an uptick Uptick A transaction occurring at price above its previous transaction. In order for an uptick to occur, a transaction price must be followed by an increased transaction price. in its commercial aircraft business and it's likely that executives won't have time to immediately tinker with Rocketdyne. ``Boeing is doing so well and is so focused on its commercial business that they'll put aside major restructuring for a while,'' he predicted. Nebel, however, disputes that assertion. ``He doesn't seem to understand that although we're ramping up our commercial business, we have a separate but parallel process (to oversee defense),'' she noted. Analysts note that as sales and operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. declines, Rockwell has been able to improve its profit margins. Kutler said the deal may be the last of the mega-billion-dollar deals, as other large defense and aerospace companies already have found merger partners, such as Lockheed and Martin Marietta Martin Marietta Corporation was founded in 1961 through the merger of The Martin Company and American-Marietta Corporation. The combined company became a leader in aggregates, cement, chemicals, aerospace, and electronics. , to deal with the declining defense dollars. Shares of Rockwell surged 2-3/8 on Thursday, to 54-7/8, while Boeing shares rose 62.5 cents, to 89-1/8. Boeing, already the world's largest commercial aircraft maker, will become the third-largest defense contractor, and take over work on the international space station, the Minuteman missile Minuteman missile U.S. ICBM first deployed in 1962. Its three generations—the Minuteman I (1962–73), the Minuteman II (1966–95), and the Minuteman III (from 1970)—have constituted most of the land-based nuclear arsenal of the U.S. since the 1960s. , the B-1B bomber and other government contracts. HIGHLIGHTS OF THE DEAL Boeing buys Rockwell's aerospace and defense divisions for $3.2 billion. Boeing assumes nearly $2.2 billion of Rockwell's debt and covers $100 million in liabilities. Boeing also issues $860 million in new shares to be paid to Rockwell shareholders. Rockwell would emerge almost debt-free, with $800 million in cash. Rockwell spins off about 21,000 employees who produce revenues of about $3 billion a year. CAPTION(S): box BOX: HIGHLIGHTS OF THE DEAL (SEE TEXT) |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion