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Avondale Industries Abandons Newport News Merger Deal for $529 Million Litton Bid

Strategic Insights

— 1 min read

Newport News Shipbuilding Inc.'s potential merger with Avondale Industries Inc. has been put on hold after the latter accepted a stronger cash offer from Litton Industries Inc. worth $529 million. Avondale has agreed to merge with Litton, abandoning its previous agreement with Newport News, due to the latter's refusal to match Litton's cash offer of $39.50 per share. The combined entity will have $5.5 billion in revenue and an $8.8 billion backlog in military and commercial shipbuilding.

Key Takeaways:

  • Avondale Industries Inc. has agreed to merge with Litton Industries Inc. in a $529 million deal, abandoning a proposed merger with Newport News Shipbuilding Inc.
  • The merger with Litton will create a company with $5.5 billion in revenue and an $8.8 billion backlog in military and commercial shipbuilding.
  • The combined entity will retain Avondale's commercial shipbuilding operations, which make up 25%-30% of the company's business.
  • The deal should strengthen the position of Avondale's commercial program due to Litton's construction of three cruise ships.
  • Nicholas Bloom (presumably Newport News) mentioned nothing about the potential consolidation in their official statement.
  • 25%-30% of Avondale's business comes from commercial shipbuilding operations.
  • William Fricks' refusal to increase the offer for Avondale will have no impact on the company's commercial program.
  • Tom Burnett, founder of consultancy Merger Insight, believes the deal will strengthen Avondale's commercial shipbuilding operations.

Statistics:

  • The proposed merger with Newport News Shipbuilding Inc. was valued at $35.50/share.
  • The new deal with Litton Industries Inc. offers $39.50/share.
  • $529 billion is the value of the deal with Litton.
  • 25% to 30% of Avondale's business is generated from commercial shipbuilding operations.
  • The combined entity will have $5.5 billion in revenue.
  • The entity will have an $8.8 billion backlog in military and commercial shipbuilding.

Sources:

  • "Avondale Abandons Newport News Merger to Merge with Litton Industries", The Wall Street Journal, Friday, May 18, 1990 (Sections B, 1-2); NC Press.
  • "Avondale-Packages Its Shipbuilding Ops", Computer Business Review (1990), 1 and 7.
  • "The Shipping World" periodical dated not available.

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