LOS ANGELES, Nov. 19 (UPI) -- Defense giant Northrop Grumman Corp. said it has signed a definitive agreement to sell the TRW Automotive unit of TRW Inc. to the Blackstone Group in a deal that valued at $4.725 billion.
The Blackstone Group, a private investment firm, recently raised the world's largest private equity fund at $6.45 billion, and the purchase of TRW Automotive will be the first investment made by this fund.
Under the terms of the deal, which is conditioned on the closing of the Northrop Grumman/TRW merger, the Northrop will receive $4.725 billion, comprised of $3.757 billion in cash, $600 million in debt securities and an initial $368 million equity interest, or approximately 42 percent of total equity of $868 million, in TRW Automotive.
The companies said they intend to reduce their initial equity positions in TRW Automotive before closing.
At the close of the deal, anticipated to be in the first quarter of 2003, Northrop Grumman's equity interest is expected to be approximately 20 percent, which would increase total cash consideration to between $3.9 billion and $4.0 billion.
Cash proceeds from the sale of TRW Automotive, along with the proceeds already received from the completed sale of TRW Aeronautical Systems, will be used to pay down debt, Northrop Grumman said.
Financing necessary to complete the transaction has been provided by JP Morgan, Credit Suisse First Boston and Lehman Brothers.
Kent Kresa, Northrop Grumman's chairman and chief executive officer, said, "We're very pleased to announce the sale of TRW Automotive. As we've maintained, Northrop Grumman's strategic interest is in TRW's space, electronics and systems businesses.
"We believe that our agreement with Blackstone is an attractive transaction for our shareholders and will allow our management team to quickly focus its full attention on integrating TRW's superior space and defense assets into our portfolio," Kresa said.
Ronald D. Sugar, Northrop Grumman's president and chief operating officer, added, "We look forward to benefiting from TRW's strong defense operations once the TRW merger is complete. In addition, we are pleased to be working on this transaction with Blackstone, which has a long history of making successful equity investments, including those in the automotive parts sector.
"Moreover, the separation provides a great opportunity for the employees of TRW Automotive to flourish as part of a new, focused stand-alone company," Sugar added.
Stephen A. Schwarzman, president and chief executive officer of Blackstone Group, said, "TRW Automotive is a leading global automotive supplier which enjoys a unique competitive position in the active and passive safety arena. We look forward to supporting the company's growth strategy as an independent company."
Northrop Grumman and TRW shareholder votes on the merger are scheduled for Dec. 11. The sale of TRW Automotive is also subject to customary closing conditions including review under the Hart-Scott-Rodino Act and obtaining certain other governmental and regulatory approvals in the United States and Europe.
