TRW Commits to Defense Operations, Seeks to Strengthen Business

Strategic Insights -

TRW, a leading global defense company, has reaffirmed its commitment to its $4.7 billion defense operations, stating that it will continue to grow the business without considering major defense-related transactions until it has debt from its recent $7 billion acquisition of LucasVarity is addressed. In an interview with Defense Daily, Joseph Gorman, TRW's chairman and CEO, emphasized the importance of its defense operations, citing their profitability and return on investment. TRW's defense business is set to comprise about 31% of the company's total projected revenue of $20 billion.

Key Takeaways:

  • TRW is committed to its defense operations and plans to grow the business, despite recent speculation about a potential sale of non-automotive operations.
  • The company's defense business is highly profitable, with a high return on investment, and is considered a key element of TRW's success.
  • TRW has acquired LucasVarity for $7 billion, but has stated that only about $1.2 billion of the company is defense-related, with the remainder consisting of automotive operations.
  • The acquisition of LucasVarity is expected to conclude in the coming weeks, with TRW then focusing on the consolidation of its operations and the retirement of debt.
  • TRW's defense operations are considered an "incredible storehouse of technology" that has benefits across the company, including in the automotive business.
  • Markets in which TRW expects to excel include national missile defense, high-power lasers for defense and commercial applications, and unmanned aerial vehicles.

Statistics:

  • TRW's defense operations have a projected revenue of about $6.2 billion (31% of total projected revenue of $20 billion).
  • The company has acquired LucasVarity for $7 billion, with about $1.2 billion of the company being defense-related.
  • TRW incurred $7 billion in new debt and $2 billion in existing debt during the LucasVarity acquisition.
  • The company expects to raise about $1.5 billion in proceeds from the consolidation of its operations, which will be used to retire debt.
  • TRW's defense operations have continued to grow steadily without engaging in massive merger and acquisition activity.

Sources:

  • Defense Daily
  • Aviation Week's Aerospace Finance '99 conference
  • TRW press release
  • LucasVarity press release