General Dynamics Corp., the fourth-largest U.S. defense contractor, said Thursday that it would buy Nassco Holdings Inc. for $415 million in cash and assumed debt to beef up its ship-repair business and better compete for future commercial and Navy contracts.
General Dynamics, based in Falls Church, Va., would pay $370 million in cash and assume $45 million in debt for employee-owned Nassco, the parent of National Steel & Shipbuilding Co.
The acquisition of San Diego-based Nassco gives General Dynamics its third shipyard. It already owns the Bath Iron Works in Bath, Maine, one of two destroyer makers for the Navy, and Electric Boat, in Groton, Conn., one of two submarine makers. Nassco specializes in designing and building smaller vessels, such as Navy support ships, and repairs Navy vessels. It also builds commercial ships.
"It seems like a fantastic opportunity" because it gives General Dynamics ship operations on both coasts, said James Winchester, defense analyst for Lazard Freres & Co.
General Dynamics shares closed unchanged at $54 on the New York Stock Exchange.
Nassco is the only shipyard capable of making major combat-ship repairs. It also positions General Dynamics for Navy and commercial business in the $500-million to $650-million range, to build the next generation of Fast Combat Support Ship, known as the ADC-(X), and commercial oil tankers as well as vessel repairs.
Nassco's sales are forecast at $485 million for this year. It would add to earnings immediately, General Dynamics said.
General Dynamics' strategy has been to buy companies that will allow it to supply the Navy with virtually all the types of vessels it needs, said Ronald O'Rourke, a naval warfare analyst for the Congressional Research Service. Now, "all that's missing is to build aircraft carriers," he said.
"This is an excellent strategic fit for us," General Dynamics Chairman Nicholas Chabraja said. Taking on $45 million of debt would have little impact on the company, he added.
Nassco is the seventh strategic acquisition for General Dynamics since 1995. It bought Bath Iron Works and Teledyne Vehicle Systems in 1995; Lockheed Martin Corp.'s defense systems and armament systems in 1996; and Lucent Technologies Inc.'s advanced technology systems unit and Computing Devices from Ceridian Corp. in 1997.
General Dynamics makes the DD-51 Arleigh Burke destroyer, SSN-21 Seawolf submarine and M1A2 Abrams tank.
Founded as a small machine shop in 1905, Nassco has been an employee-owned company since 1989 and only builds non-combat vessels.